2010

Transcription

2010

NOTICE OF ANNUAL MEETING OF THE HOLDERS
OF COMMON SHARES
NATIONAL BANK OF CANADA
Management Proxy Circular
March 31, 2010
February 12, 2010
Dear Shareholder,
We cordially invite you to join the members of the Board of Directors and management for the Annual Meeting of the Holders of Common Shares of
National Bank of Canada to be held at 9:00 a.m. (EDT) on Wednesday, March 31, 2010 at the Centre Mont-Royal, located at 2200 Mansfield Street, Montreal,
Quebec, Canada.
The Annual Meeting is an opportunity for us to present our results and current projects, and for you to voice your opinion on the matters put to a vote at this
Meeting and ask questions.
This year for the first time, you will be invited to participate in an advisory vote to have your say on the approach taken by the Board of Directors of the Bank
with respect to executive compensation.
The proposals to be voted on at this Meeting are set out in this Management Proxy Circular. Please take the time to examine the information provided concerning
these proposals.
Your participation is important to us. If you cannot attend in person, you can nonetheless express your opinion on the matters put to a vote by using the
enclosed form of proxy or voting instruction form.
There will be a live webcast of this Meeting available at www.nbc.ca/investorrelations.
Sincerely,
(signed) Jean Douville
Chairman of the Board
(signed) Louis Vachon
President and Chief Executive Officer
National Bank of Canada / Management Proxy Circular
NOTICE OF ANNUAL MEETING OF THE HOLDERS OF COMMON SHARES OF NATIONAL BANK OF CANADA
Date:
Time:
Place:
Wednesday, March 31, 2010
9:00 a.m. (EDT)
Centre Mont-Royal
2200 Mansfield Street
Montreal, Quebec
Canada
Purposes of the meeting:
1.
2.
3.
4.
5.
6.
To receive the Consolidated Financial Statements for the fiscal year ended October 31, 2009 and the auditors’ report thereon;
To elect the directors;
To consider an advisory resolution (non-binding) to accept the approach taken by the Board of Directors of the Bank with respect to executive compensation,
as presented in the Management Proxy Circular (the “Circular”);
To appoint the auditors;
To examine the proposals presented by a shareholder and set out in Schedule A to this Circular; and
To transact any other business which may properly come before the meeting.
Holders of Common Shares of National Bank of Canada (the “Bank”) whose shares are listed in the Bank’s register in their name, the name of a broker or other
intermediary, or the name of a duly authorized agent, on February 12, 2010 at 5:00 p.m. (EST), are entitled to receive notice of the Annual Meeting of the
Holders of Common Shares of the Bank (the “Meeting”) and to cast one vote per Common Share held, subject to the restrictions set out in the Bank Act (Canada)
(the “Act”).
On the record date for the Meeting, namely, February 12, 2010, 161,827,365 Common Shares of the Bank were outstanding and eligible to be voted at the
Meeting, subject to the restrictions set out in the Act.
By order of the Board of Directors
(signed) Linda Caty
Vice-President and Corporate Secretary
February 12, 2010
Registered holders of Common Shares may exercise their voting rights by attending the Meeting or by completing a form of proxy. Registered holders of
Common Shares who are unable to attend the Meeting are asked to complete, date and sign the enclosed form of proxy. Proxies should be returned by mail
in the pre-addressed, postage-paid envelope provided or other envelope to Computershare Trust Company of Canada at 100 University Avenue, 9th Floor,
Toronto, Ontario, Canada M5J 2Y1, or by fax to 1-866-249-7775. To be valid, the form of proxy must be received by Computershare Trust Company of Canada
no later than 5:00 p.m. (EDT) on Monday, March 29, 2010.
For more information on the procedure to be followed by holders of Common Shares who received a voting instruction form, please refer to “Beneficial
Owners” in Section 1 of this Circular and the instructions received from your broker.
For any questions regarding the Circular or the exercise of voting rights, please contact the proxy solicitation firm, Georgeson Shareholder Communications
Canada Inc., by calling 1-888-605-8407.
ABBREVIATIONS USED
TABLE OF CONTENTS
The following abbreviations are used from time to time in
this Management Proxy Circular.
SECTION 1 VOTING INFORMATION
ABCP:
Asset-backed commercial paper
SECTION 2 BUSINESS OF THE MEETING
Act:
Bank Act, S.C. 1991, c. 46
ARMC:
Audit and Risk Management Committee of the
Board
Bank:
National Bank of Canada
BIS:
Bank for International Settlements
Receipt of the Consolidated Financial Statements and Auditors’ Report
Election of Directors
Advisory Vote on Executive Compensation
Appointment of Auditors
Auditors’ Fees
Voting on Shareholder Proposals
Board:
Board of Directors of the Bank
SECTION 3 INFORMATION ON DIRECTOR NOMINEES
Circular:
Management Proxy Circular for the Meeting
Career Profile
Independence of Director Nominees
Outside Directorships
Male/Female Representation on the Board
Computershare: Computershare Trust Company of Canada
CRCGC:
Conduct Review and Corporate Governance
Committee of the Board
CSA:
Canadian Securities Administrators
DSU:
Deferred stock unit
ESOP:
Employee Share Ownership Plan
GAAP:
Canadian generally accepted accounting
principles
HRC:
Human Resources Committee of the Board
IC:
Independent Committee of the Board
IFRS:
International Financial Reporting Standards
Meeting:
Annual Meeting of the Holders of Common
Shares of National Bank of Canada to be held
on Wednesday, March 31, 2010 at 9:00 a.m.
(EDT) and any reconvening thereof in case of an
adjournment
NBF:
National Bank Financial
NCIB:
Normal course issuer bid of the Bank
PSU:
Performance share unit
Regulation
51-102:
Regulation 51-102 Respecting Continuous
Disclosure Obligations
RSU:
Restricted stock unit
SAR:
Stock appreciation right
SAR Plan:
Stock Appreciation Rights Plan of the Bank
SB/DT:
Samson Bélair/Deloitte & Touche s.e.n.c.r.l.
SEDAR:
System for Electronic Document Analysis and
Retrieval
Stock Option
Plan:
Stock Option Plan of the Bank
Registered Holders
Beneficial Owners
3
3
3
3
3
3
4
20
20
20
SECTION 4 INFORMATION ON THE BOARD
Highlights of Fiscal 2009 Compensation of Directors of the Bank and its Subsidiaries for the
Fiscal Year Ended October 31, 2009
Share Ownership Requirements
21
21
21
SECTION 5 INFORMATION ON BOARD COMMITTEES
Board Committees
Conduct Review and Corporate Governance Committee
Independence of Members
Role of the Conduct Review and Corporate Governance Committee
Achievements During the Fiscal Year
Audit and Risk Management Committee
Independence and Financial Literacy of Members
Role of the Audit and Risk Management Committee
Human Resources Committee
Mandate of the Human Resources Committee
Independence and Competencies of Members
Work Plan and Achievements During the Fiscal Year
Independent External Consultants
Compensation Governance
● 25
● 25
25
● 25
● 25
● 26
26
● 26
● 26
●27
● 27
● 28
● 28
29
29
SECTION 6 INFORMATION ON COMPENSATION
Compensation Discussion and Analysis
Strategic Objectives of the Compensation Policy and the Bank’s Financial Performance
Leadership Development, Performance Management and Succession Planning
Approval and Governance Process for Compensation Policies and Programs
Benchmarking
Components of Executive Compensation
Relationship Between the Return on Bank Shares and the
Compensation of Named Executive Officers
Superintendent: Superintendent of Financial Institutions (Canada)
SECTION 7 INFORMATION ON THE COMPENSATION
TSR:
Total Shareholder Return
1
2
31
31
32
32
32
32
36
42
OF THE NAMED EXECUTIVE OFFICERS
Information on the Compensation of the Named Executive Officers
Summary of Compensation of Named Executive Officers
Share Ownership
Share-Based and Option-Based Awards Outstanding
Incentive Plan Awards – Value at Vesting or Value Earned During the Fiscal Year
Retirement Plans for Named Executive Officers
Employment Contract Termination of Employment Policy in the Event of a Change of Control Disclosure to Shareholders on the Board’s Approach to Executive Compensation
44
54
55
56
57
57
58
58
60
SECTION 8 OTHER INFORMATION
Indebtedness of Directors, Executive Officers and Employees
Directors’ and Officers’ Liability Insurance
Share Repurchase Program
Minutes
Contacting the Board of Directors
SCHEDULE A SHAREHOLDER PROPOSALS
61
62
● 62
62
62
63
SCHEDULE B STATEMENT OF CORPORATE GOVERNANCE PRACTICES
65
SCHEDULE c MANDATE OF THE BOARD OF DIRECTORS
70
MANAGEMENT PROXY CIRCULAR
As at February 5, 2010 (unless otherwise indicated)
SECTION 1
VOTING INFORMATION
Solicitation of Proxies
Registered Holders
This Circular is provided in connection with the solicitation of proxies by
management of the Bank, for the purposes set forth in the Notice of Meeting,
for use at the Meeting to be held at 9:00 a.m. (EDT) on Wednesday, March
31, 2010 at the Centre Mont-Royal, 2200 Mansfield Street, Montreal, Quebec,
Canada, and, if adjourned, at any reconvening thereof.
The proxies will be solicited by regular or electronic mail, by telephone
or in person. Employees, officers, directors or agents of the Bank will solicit
the proxies. The Bank will use the services of the proxy solicitation firm
Georgeson Shareholder Communications Canada Inc. and estimates that it
will pay approximately $34,000 in fees for these services.
Holders whose Common Shares are registered in their name in the Bank’s
register are registered holders. Registered holders of Common Shares of the
Bank may vote in person at the Meeting, or may complete, sign and return
the enclosed form of proxy. This form of proxy authorizes a proxyholder to
represent and vote on behalf of a registered holder at the Meeting.
Voting Rights of Common Shares
Holders of Common Shares of the Bank whose shares are listed in the Bank’s
register in their name, the name of a broker or other intermediary, or the name
of a duly authorized agent, on February 12, 2010 at 5:00 p.m. (EST), are
entitled to receive notice of the Meeting and to cast one vote per Common
Share held, subject to the restrictions set out in the Act.
On the record date for the Meeting, namely, February 12, 2010,
161,827,365 Common Shares of the Bank were outstanding and eligible to
be voted at the Meeting, subject to the restrictions set out in the Act.
Holders of Common Shares are entitled to cast one vote per share held
on the matters set out in the Notice of Meeting. However, the Act contains
provisions prohibiting the exercise of voting rights attached to shares of the
Bank beneficially owned by:
i)
ii)
the Government of Canada or of a province;
the government of a foreign country or of any political subdivision of a
foreign country;
iii) an agency of any of these entities;
iv) a person who has acquired a significant interest in a class of Bank shares
(more than 10% of the shares in the class) without the approval of the
Minister of Finance; or
v) a person who holds a significant interest in a class of shares of another
widely held bank or bank holding company with equity of $8 billion or
more.
In addition, no person and no entity controlled by any person may cast
votes in respect of any shares beneficially owned by the person or the entity
that represent, in the aggregate, more than 20% of the eligible votes.
To the knowledge of the directors and senior management of the Bank,
and according to the latest data available, no person beneficially owns, directly
or indirectly, or exercises control or direction over more than 10% of outstanding
Common Shares of the Bank.
Appointment of Proxyholders
The proxyholders already designated in the form of proxy are directors of
the Bank. If a registered holder wishes to appoint as his or her proxyholder
to represent him or her at the Meeting a person other than those whose
names are printed on the form of proxy, he or she may do so by striking out
the names appearing thereon and inserting such other person’s name in the
blank space provided.
If the registered holder is not a natural person, the form of proxy must
be signed by a duly authorized officer or agent of said registered holder. A
proxyholder need not be a holder of Common Shares of the Bank.
To be valid, the form of proxy must be returned by mail in the preaddressed, postage-paid envelope provided or other envelope to Computershare
Trust Company of Canada at 100 University Avenue, 9th Floor, Toronto,
Ontario, Canada M5J 2Y1, or by fax to 1-866-249-7775, and received no later
than 5:00 p.m. (EDT) on Monday, March 29, 2010.
Voting by Proxy
The proxyholder named in the form of proxy will exercise the voting rights
attached to the Common Shares in accordance with the instructions given by
the registered holder.
If no instructions are given, the directors designated as proxyholders
by the Bank will exercise the voting rights attached to the Common Shares
as follows:
––
––
––
––
FOR the election of each of the director nominees;
FOR the advisory resolution on the Board’s approach to executive
compensation, as presented in Sections 6 and 7 of this Circular;
FOR the appointment of the auditors; and
AGAINST Proposals Nos. 1 and 2 presented by a shareholder and set
out in Schedule A to this Circular.
If no instructions are given, any other proxyholder will have discretionary
authority when exercising the voting rights attached to the Common Shares
concerning these matters.
The proxyholder has discretionary authority with respect to any
amendments or variations proposed at the Meeting to the matters set out in
the form of proxy and any other business which may properly come before
the Meeting.
As at the date of this Circular, Bank management is not aware that any
amendment or other matter is to be presented at the Meeting.
1
SECTION 1 VOTING INFORMATION (cont.)
Revocation of Proxies
Appointment of Proxyholders
Registered holders may revoke their proxy as follows:
The proxyholders already designated in the voting instruction form are
directors of the Bank. If a beneficial owner wishes to appoint as his or her
proxyholder to represent him or her at the Meeting a person other than those
whose names are printed on the voting instruction form, he or she may do
so by striking out the names appearing thereon and inserting such other
person’s name in the blank space provided.
If the beneficial owner is not a natural person, the voting instruction
form must be signed by a duly authorized officer or agent of said beneficial
owner. A proxyholder need not be a holder of Common Shares of the Bank.
To be valid, the voting instruction form must be returned following the
procedure indicated on the form.
i)by delivering a written notice to this effect, signed by them or by their
duly authorized agent to:
––
––
the Head Office of the Bank, c/o Corporate Secretary’s Office,
National Bank of Canada, 600 De La Gauchetière Street West, 4th
Floor, Montreal, Quebec, Canada H3B 4L2, no later than 5:00 p.m.
(EDT) on the last business day preceding the date of the Meeting,
namely, Tuesday, March 30, 2010, or prior to any reconvening
thereof in case of an adjournment; or
the Chairman of the Meeting on the day of the Meeting, or, if
adjourned, any reconvening thereof; or
ii)by completing, signing and returning to Computershare Trust Company,
in the manner set out on the form, a new form of proxy bearing a later
date than the form already returned.
Confidentiality of Votes
To protect the confidential nature of voting by proxy, the votes exercised by
proxy are received and compiled for the Meeting by Computershare, the Bank’s
registrar and transfer agent. Computershare submits a copy of a form of proxy
to the Bank only when a registered holder clearly wishes to express a personal
opinion to management, or when necessary to comply with legal
requirements.
Voting by Instruction Form
The proxyholder named in the voting instruction form will exercise the voting
rights attached to the Common Shares in accordance with the instructions
given by the beneficial owner.
If no instructions are given, the directors of the Bank designated as
proxyholders on the voting instruction form will exercise the voting rights
attached to the Common Shares as follows:
––
––
––
––
Beneficial Owners
Beneficial owners are holders whose Common Shares are held in their name
by a nominee, such as a broker, other intermediary or a duly authorized agent.
Consequently, these Common Shares are not registered under their beneficial
owner’s name in the Bank’s register.
To vote in person at the Meeting, beneficial owners must:
––
––
––
insert their own name as proxyholder in the space provided for this
purpose on the voting instruction form;
not otherwise complete the form as their vote will be taken at the
Meeting; and
return the voting instruction form following the procedure indicated on
the form.
Beneficial owners unable to attend the Meeting may also exercise their
vote by completing, signing and returning the voting instruction form sent to
them by their broker or any other intermediary following the procedure indicated
on the form.
The voting instruction form authorizes proxyholders to represent beneficial
owners and vote on their behalf at the Meeting. Brokers, other Canadian
intermediaries and their duly authorized agents are prohibited from exercising
the voting rights attached to Common Shares on behalf of beneficial owners
unless they are specifically instructed to do so.
2
FOR the election of each of the director nominees;
FOR the advisory resolution on the Board’s approach to executive
compensation, as presented in Sections 6 and 7 of this Circular;
FOR the appointment of the auditors; and
AGAINST Proposals Nos. 1 and 2 presented by a shareholder and set
out in Schedule A to this Circular.
If no instructions are given, any other proxyholder will have discretionary
authority when exercising the voting rights attached to the Common Shares
concerning these matters.
The proxyholder has discretionary authority with respect to any
amendments or variations proposed at the Meeting to the matters set out in
the voting instruction form and any other business which may properly come
before the Meeting.
As at the date of this Circular, management of the Bank is not aware that
any amendment or other matter is to be presented at the Meeting.
Revocation of Proxies
Beneficial owners may revoke their voting instructions by following their
broker’s instructions.
Confidentiality of Votes
To protect the confidential nature of voting by beneficial owners, the votes
exercised by voting instruction form are compiled and transmitted by the
intermediaries to Computershare, the Bank’s registrar and transfer agent.
SECTION 2
BUSINESS OF THE MEETING
Receipt of the Consolidated Financial Statements
and Auditors’ Report
The Consolidated Financial Statements of the Bank for the fiscal year ended
October 31, 2009 and the auditors’ report thereon are an integral part of the
2009 Annual Report of the Bank, which is available on its website
(www.nbc.ca) and on the SEDAR website (www.sedar.com).
Election of Directors
The number of directors to be elected is 15. The management of the Bank
recommends voting FOR the election of all the director nominees whose
names and career profiles are presented in Section 3 of this Circular. This
section also presents the names of the reporting issuers(1) as well as public
and parapublic corporations on whose boards the nominees currently serve
or have served in the past five years.
All directors elected at the Meeting will hold office until their resignation
or the election or appointment of their replacement, or until the close of the
next Annual Meeting of the Holders of Common Shares of the Bank.
A majority voting rule is in effect for purposes of electing director
nominees. For more information, please refer to the Statement of Corporate
Governance Practices in Schedule B to this Circular.
Appointment of Auditors
The ARMC and the Board recommend voting FOR the appointment of SB/DT
as auditors of the Bank for the fiscal year starting November 1, 2009 and ending
October 31, 2010.
SB/DT has served as auditors of the Bank for the past five fiscal years.
The resolution regarding the appointment of the auditors must be adopted
by a majority of the votes cast by the holders of Common Shares present or
represented by proxy and entitled to vote at the Meeting.
For information on the Guidelines for the Management of Services
Provided by the External Auditors, please refer to “Information on the Audit
and Risk Management Committee of the Board of Directors” in the Annual
Information Form filed on December 10, 2009 on the SEDAR website
(www.sedar.com) and on the Bank’s website (www.nbc.ca).
Auditors’ Fees
Each year, the ARMC recommends to the Board that it approve the fees to be
paid to the external auditors and the envelopes established under the
Guidelines for the Management of Services Provided by the External Auditors.
The following table details fees billed by SB/DT to the Bank and to its
subsidiaries for various services rendered during the past two fiscal years.
2009
($)
5,118,943
1,458,875
327,748
209,988
7,115,554
Advisory Vote on Executive Compensation
The Board is responsible for determining the underlying objectives and
principles of the approach to executive compensation. It carries out this
responsibility with the assistance of the HRC. On February 26, 2009, the Bank
announced that, beginning in 2010, it would put the Board’s approach to
executive compensation to an advisory vote of its holders of Common
Shares.
Through the advisory vote mechanism, the Board demonstrates its
commitment to the holders of Common Shares of the Bank and recognizes
its responsibility regarding decisions made concerning executive compensation.
The Board believes it is essential for the holders of Common Shares of the
Bank to be well informed of its approach in this regard and feels that they
must be given the opportunity to understand and appreciate the underlying
objectives and principles.
During the past year, the Bank as well as other Canadian issuers have
worked together with various parties, including shareholders and the Canadian
Coalition for Good Governance, to draft a standard resolution.
The HRC and the Board recommend voting FOR the advisory resolution
on the Board’s approach to executive compensation.
The advisory resolution to be voted on is as follows:
On an advisory basis and not to diminish the role and responsibilities
of the Board, that the holders of Common Shares accept the approach
to executive compensation disclosed in the Bank’s Circular delivered in
advance of the Meeting.
The above advisory resolution, upon which the holders of Common
Shares present or represented by proxy and entitled to vote at the Meeting
are asked to vote, is non-binding on the Board.
However, the Board will consider the results of the vote when reviewing
its approach to executive compensation.
For more information on the Board’s approach to executive compensation,
please refer to Sections 6 and 7 of this Circular and the information document
summarizing its approach to compensation available on the Bank’s website
(www.nbc.ca).
Audit services(1)
Audit-related services(2)
Tax consulting(3)
Other services(4)
Total
2008
($)
5,365,632
405,717
1,115,958
26,669
6,913,976
(1) These fees include fees for services related to the audit of the Consolidated Financial
Statements of the Bank and the financial statements of its subsidiaries or other services
normally provided by the external auditors in connection with statutory or regulatory
filings or engagements required by applicable legislation. These fees also include fees
for comfort letters, statutory audits, certification services, consents and assistance
with the preparation and review of documents filed with regulators, the interpretation
of accounting and financial reporting standards, and translation services for reports
to shareholders.
(2) These fees include certification and related services performed by the Bank’s external
auditors. These services also include services related to the conversion to IFRS,
accounting consultations in connection with acquisitions and divestitures and internal
control reviews.
(3) These fees include fees for assistance in tax planning, during restructurings, and when
taking a tax position, as well as the preparation and review of income and other tax
returns and tax opinions.
(4) These fees include fees for consulting services for projects, risk management services,
and statutory and/or regulatory compliance services.
Voting on Shareholder Proposals
The Bank received, within the time limits prescribed by the Act, proposals
from a shareholder and has included them in this Circular. The full text of the
proposals to be voted on by the holders of Common Shares is set out in
Schedule A to this Circular.
The Board and management of the Bank recommend voting AGAINST
Proposals Nos. 1 and 2 for the reasons stated at the end of each of these
proposals.
These proposals will be adopted if approved by a majority of the
votes cast by the holders of Common Shares present or represented by
proxy and entitled to vote at the Meeting.
The deadline by which the Bank must receive proposals from its
shareholders for presentation at the Annual Meeting of the Holders of
Common Shares to be held in 2011 is Monday, November 15, 2010 at
5:00 p.m. (EST).
(1) In accordance with the definition of this term in Canadian securities legislation,
a reporting issuer is an issuer that has made a distribution of securities to the public.
3
SECTION 3
INFORMATION ON DIRECTOR NOMINEES
Lawrence S. Bloomberg
Career profile
Mr. Bloomberg is an advisor to National Bank Financial, where he served as Co-Chairman of the Board and Co-Chief Executive
Officer from October 1999 to October 2000. Previously, Mr. Bloomberg was Chairman of the Board, President and Chief
Executive Officer of First Marathon Inc., a company he founded in 1979, which merged with National Bank Financial Inc. in
1999. Prior to and after starting his own business, he contributed to the development of many financial and non-financial
companies.
Mr. Bloomberg currently serves as Chairman of the Board of Toronto’s Mount Sinai Hospital and sits on the board of directors
of the MaRS Discovery District.
Age: 67
Toronto, Ontario, Canada
Director since August 1999
Role on the Board of Directors of the Bank
and its committees
Meetings attended
(during the past fiscal year)
Overall meetings attended
Board member
21/21
21/21
100%
100%
Non-independent
Areas of expertise:
––
––
––
Entrepreneurship
Financial services
International markets
Reporting issuers and public and parapublic corporations
Director
(during the past five years)
Role on boards and committees
(as at October 31, 2009)
–
–
Securities held
(as at October 31)
Year
Common
Shares(1)
DSUs (2)
Total
Common
Shares
and DSUs
Share
price (3)
($)
Total market
value of
Common
Shares and
DSUs ($)
Minimum required
($) Shares/DSUs
2009
35,458
–
35,458
56.39
1,999,477
350,000
6,207
2008
100,099
–
100,099
45.21
4,525,476
350,000
7,742
2007
543,937
–
543,937
54.65
29,726,157
350,000
6,404
Meets the
Bank’s share
ownership
requirements
for directors (4)
Yes
(1) This number includes Common Shares directly or indirectly beneficially owned or controlled.
(2) For more information, please refer to “Compensation of Directors of the Bank and its Subsidiaries for the Fiscal Year Ended October 31,
2009” in Section 4 of this Circular.
(3) These amounts represent the price of Common Shares of the Bank on the Toronto Stock Exchange at the close of trading on October 31
of each year. However, as October 31, 2009 was not a business day, the amounts represent the price of Common Shares of the Bank on
the Toronto Stock Exchange at the close of trading the previous day, namely, October 30, 2009.
(4) For more information, please refer to “Share Ownership Requirements” in Section 4 of this Circular.
4
SECTION 3 INFORMATION ON DIRECTOR NOMINEES (cont.)
Pierre Bourgie
Career profile
Mr. Bourgie has been President and Chief Executive Officer of Société Financière Bourgie (1996) inc., a diversified investment
company, for 13 years. He is also President of Ipso Facto, a real estate financing limited partnership. He has served on the
board of directors of Saputo Inc. since 1997.
Mr. Bourgie is active in a number of economic, community and cultural organizations. In particular, he chairs the Fondation
Arte Musica, which he created in 2007, is a member of the Conseil des arts de Montréal and of the board of the Musée des
Beaux-Arts de Montréal.
Age: 53
Montreal, Quebec, Canada
Director since March 1998
and its committees
Meetings attended
Board member
21/21
100%
Member of the CRCGC
5/5
100%
Member of the ARMC
13/13
100%
39/39
100%
Independent
Areas of expertise:
––
––
––
Corporate management
Finance
Governance
Director
Saputo Inc.
1997 to date
• M
ember of the Corporate Governance and
Canam Group Inc.
1997 to 2005
–
Securities held
(as at October 31)
Total
Common
Shares and DSUs
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Minimum required
Common
Shares
DSUs 2009
109,097
–
109,097
56.39
6,151,980
350,000
6,207
2008
108,591
–
108,591
45.21
4,909,399
350,000
7,742
2007
107,783
–
107,783
54.65
5,890,341
350,000
6,404
Year
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
5
André Caillé
Career profile
Mr. Caillé is a director of several corporations, including Junex Inc., an oil and gas exploration corporation, where he has
acted as Senior Strategic Advisor. He was Chairman of the Board of Hydro-Québec from April to September 2005 and served
as the corporation’s President and Chief Executive Officer and director from October 1996 to April 2005. From 1982 to 1987,
Mr. Caillé held various senior executive positions with Gaz Métro Inc., formerly known as Gaz Métropolitain Inc., including
President and Chief Executive Officer from 1987 to 1996. He was also Director of Environmental Protection Services and then
Deputy Minister of the Environment of Quebec from 1978 to 1981. From 2004 to 2007, he served as Chairman of the World
Energy Council.
Mr. Caillé is involved with a number of charitable organizations, and is notably Co-Chairman of the Board of the Fondation
Père Sablon.
Age: 66
Lac-Brome, Quebec, Canada
Over the years, Mr. Caillé has been the recipient of many prestigious awards, including the Pierre-DeCelles award in recognition
of his outstanding management in public administration. He was also made a Knight of the Legion of Honour of the French
Republic and has received the Order of Canada and the National Order of Quebec.
Director since October 2005
Independent
Areas of expertise:
––
––
––
Corporate management and
governance
Energy and environment
Finance
and its committees
Meetings attended
Board member
21/21
100%
Chair and member of the CRCGC
5/5
100%
Member of the HRC
5/5
100%
Member of the ARMC
13/13
100%
Chair and member of the IC(1)
1/1
100%
45/45
100%
Director
Junex Inc.
2008 to date
• Chair of the Compensation Committee
Hydro-Québec
1996 to 2005
–
Quebecor World Inc.(2)
2005 to 2009
–
Securities held
(as at October 31)
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
2,150
8,606
10,756
56.39
606,531
350,000
6,207
2008
1,332
4,546
5,878
45.21
265,744
350,000
7,742
2007
676
2,677
3,353
54.65
183,241
350,000
6,404
Year
Minimum required
($) Shares/DSUs
(1) For more information, please refer to “Independent Committee” in Section 5 of this Circular.
(2) This company is now known as World Color Press Inc.
6
Meets the
Bank’s share
ownership
requirements
for directors
Yes
Gérard Coulombe
Career profile
Mr. Coulombe is a partner of the law firm Lavery, de Billy, L.L.P. From 1977 to 2007, he was Senior Partner at Desjardins
Ducharme, L.L.P., where he chaired the board of directors from 2000 to 2007. From 1972 to 1977, he was responsible for
negotiating international tax treaties on behalf of the Department of Finance Canada. Mr. Coulombe was called to the Quebec
Bar in 1969.
Mr. Coulombe is actively involved in several charitable organizations, particularly with the board of the Chamber Orchestra
I Musici of Montreal and the Canadian International Organ Competition.
Mr. Coulombe also serves on the boards of directors of the following subsidiaries of the Bank: FMI Acquisition Inc., National
Bank Life Insurance Company, National Bank Group Inc., National Bank Acquisition Holding Inc. and National Bank Trust
Inc.
Age: 62
Sainte-Marthe, Quebec, Canada
Director since February 1994
and its committees
Meetings attended
Non-independent
Board member
21/21
21/21
100%
100%
Areas of expertise:
––
––
––
Commercial and corporate law
Financial services
Governance
Director/Trustee
Cominar Real Estate Investment Trust
2007 to date
• Member of the Compensation Committee
• Member of the Nominating and Corporate
Governance Committee
Sodisco-Howden Group Inc.(1)
–
1989 to 2005
Securities held
(as at October 31)
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
5,356
18,923
24,279
56.39
1,369,093
350,000
6,207
2008
4,884
16,397
21,281
45.21
962,114
350,000
7,742
2007
4,448
14,129
18,577
54.65
1,015,233
350,000
6,404
Year
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
(1) Sodisco-Howden Group Inc. became a private company in 2005.
7
Bernard Cyr
Career profile
Mr. Cyr has been President of Cyr Holdings Inc., a holding company in the hotel, commercial real estate, restaurant and
entertainment sectors, since 1986, and President of Dooly’s Inc., an entertainment industry franchiser, since 1993. He was
a member of the Bank’s Atlantic Canada business development committee from 1996 to 2001.
Mr. Cyr plays a very active role in his region. He serves on several boards of directors and is involved with various charitable
organizations. He is notably a member of the board of directors of the Dr. Georges-L.-Dumont Hospital Foundation in
Moncton.
Age: 62
Cap Shediac
New Brunswick, Canada
and its committees
Meetings attended
Board member
21/21
100%
Member of the ARMC
13/13
100%
Member of the IC
1/1
100%
Independent
35/35
100%
Areas of expertise:
––
––
––
Entrepreneurship
Finance
Regional markets
Director
NB Power Group
1998 to date
• Member of the Human Resources, Governance
and Nominating Committee
• Member of the Environment, Health and Safety
Committee
Securities held
(as at October 31)
8
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Year
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
13,180
–
13,180
56.39
743,220
350,000
6,207
2008
11,720
–
11,720
45.21
529,861
350,000
7,742
2007
10,312
–
10,312
54.65
563,551
350,000
6,404
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
Shirley A. Dawe
Career profile
Ms. Dawe is a Corporate Director and has been President of Shirley Dawe Associates Inc., a Toronto-based management
consulting firm, since 1986. From 1969 to 1985, she held various senior executive positions with Hudson’s Bay Company.
Her extensive management and consumer marketing experience brought Ms. Dawe to the boards of directors of numerous
public and private companies in Canada and the United States. Her expertise in the retail sector led to her appointments in
industry-specific public task forces and the boards of academic and non-profit organizations.
Ms. Dawe is also currently active in several organizations dedicated to the advancement of women’s leadership.
Age: 63
Toronto, Ontario, Canada
Director since July 1988
Independent
and its committees
Meetings attended
Board member
20/21
Member of the CRCGC
5/5
100%
Member of the HRC
5/5
100%
95%
30/31
97%
Areas of expertise:
––
––
––
Governance
Human Resources
Retail, North America
Director
Birks & Mayors Inc.
1999 to date
• Chair of the Compensation Committee
The Bon-Ton Stores, Inc.
2002 to date
• Member of the Executive Committee
• Member of the Human Resources and
Compensation Committee
OshKosh B’Gosh, Inc.(1)
–
1997 to 2005
Securities held
(as at October 31)
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
6,358
5,953
12,311
56.39
694,217
350,000
6,207
2008
5,515
5,644
11,159
45.21
504,498
350,000
7,742
2007
4,778
5,314
10,092
54.65
551,528
350,000
6,404
Year
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
(1) OshKosh B’Gosh became a private company in 2005.
9
Nicole Diamond-Gélinas
Career profile
Ms. Diamond-Gélinas has been President of Aspasie Inc., a manufacturer of colour charts, since 1988 and President of
Plastifil Inc., a synthetic colour fibre manufacturer, since 1998. She also heads Trois-Rivières Ford Lincoln Inc., a company
specializing in the sale, leasing and servicing of motor vehicles. She was a member of the Bank’s Mauricie business development
committee from 1992 to 1998.
Actively involved in her community, Ms. Diamond-Gélinas chairs the board of directors of the Fondation du Centre hospitalier
régional de Trois-Rivières inc.
Ms. Diamond-Gélinas also currently serves on the board of a Bank subsidiary, National Bank Life Insurance Company.
Age: 65
Saint-Barnabé-Nord, Quebec, Canada
Independent
and its committees
Meetings attended
Board member
21/21
100%
Member of the ARMC
13/13
100%
34/34
100%
Areas of expertise:
––
––
––
Entrepreneurship
Finance
Regional markets
Director
–
–
Securities held
(as at October 31)
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Year
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
24,796
6,873
31,669
56.39
1,785,815
350,000
6,207
2008
24,024 (1)
5,363
29,387 (1)
45.21
1,328,586 (1) 350,000
7,742
2007
23,248
3,984
27,232
54.65
1,488,229
6,404
Minimum required
($) Shares/DSUs
350,000
Meets the
Bank’s share
ownership
requirements
for directors
Yes
(1) The figures disclosed in the Management Proxy Circular dated January 9, 2009 included Preferred Shares held by Ms. Diamond‑Gélinas.
10
Jean Douville
Career profile
Mr. Douville has been Chairman of the Board of the Bank since March 10, 2004. He is also Chairman of the Board of UAP Inc.,
a company specializing in the distribution, merchandising and remanufacturing of automotive parts and replacement
accessories for cars, trucks and heavy vehicles. Mr. Douville was called to the Quebec Bar in 1968. He began working for
UAP Inc. in 1971. He became President of the company in 1981, and was subsequently appointed Chief Executive Officer in
1982 and then Chairman of the Board in 1992.
Before being appointed Chairman of the Bank’s Board, he was successively Chair of the ARMC and Chair of the CRCGC.
Age: 66
Bedford, Quebec, Canada
and its committees
Meetings attended
Chairman and member of the Board(1)
21/21
21/21
100%
100%
Director since November 1991
Independent
Areas of expertise:
Director
––
––
––
Governance
Industry
Genuine Parts Company
1992 to date
–
Richelieu Hardware Ltd.
2005 to date
• Member of the Human Resources and
Corporate Governance Committee
Securities held
(as at October 31)
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
6,742
7,267
14,009
56.39
789,968
350,000
6,207
2008
6,231
6,890
13,121
45.21
593,200
350,000
7,742
2007
5,669
6,560
12,229
54.65
668,315
350,000
6,404
Year
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
(1) As Chairman of the Board, Mr. Douville is invited to attend the meetings of the Board’s standing committees.
11
Marcel Dutil
Career profile
Mr. Dutil is Chairman of the Board and Chief Executive Officer of Canam Group Inc. He is the founder of this industrial company,
which operates plants specializing in the design and manufacture of construction products and solutions. He has devoted
his entire career to growing this company. Mr. Dutil is also a director of Manac Inc.
Mr. Dutil is involved in economic and social organizations. He is a governor of Université de Montréal, serves on the board
of Maison Catherine de Longpré, a palliative care hospice, and is a member of the Board of Governors of Conseil du patronat
du Québec.
Age: 67
Director since January 1982
Independent
and its committees
Meetings attended
Board member
20/21
95%
Member of the HRC
4/5
80%
Member of the IC
0/1
– Overall meetings attended
24/27
89%
Areas of expertise:
––
––
––
Industry
Director
Canam Group Inc.
1972 to date
• Chairman of the Board of Directors
The Jean Coutu Group (PJC) Inc.
1995 to date
• Member of the Audit Committee
Securities held
(as at October 31)
12
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Year
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
22,056
13,734
35,790
56.39
2,018,198
350,000
6,207
2008
21,561
11,906
33,467
45.21
1,513,043
350,000
7,742
2007
21,061
10,070
31,131
54.65
1,701,309
350,000
6,404
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
Jean Gaulin
Career profile
Mr. Gaulin is a Corporate Director. He is currently Chairman of the Board of RONA Inc. and a member of the boards of directors
of Saputo Inc. and Bombardier Recreational Products Inc. He was Chairman of the Board of Ultramar Diamond Shamrock
Corporation from January 1, 2000 to January 1, 2002 where he was also President and Chief Executive Officer from January 1,
1999 to January 1, 2002. In 1996, following the merger of Ultramar Corporation and Diamond Shamrock Inc., he was named
Vice-Chairman of the Board, President and Chief Operating Officer of Ultramar Diamond Shamrock Corporation. Prior to the
merger, he was Chairman of the Board and Chief Executive Officer of Ultramar Corporation.
Mr. Gaulin is involved in many charitable organizations. He is Chairman of the board of directors of the foundation Friends of
Polytechnique of Montreal.
Age: 67
Laguna Niguel, California, United States
and its committees
Meetings attended
Director since October 2001
Board member
21/21
100%
Chair and member of the HRC
5/5
100%
Member of the ARMC
12/13
Member of the IC
1/1
Independent
Areas of expertise:
––
––
––
Finance
Natural resources
92%
39/40
98%
100%
Director
Saputo Inc.
2003 to date
• M
RONA Inc.
2004 to date
• Chairman of the Board of Directors
Crane Co.
2001 to 2007
–
Securities held
(as at October 31)
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Year
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
25,831
8,891
34,722
56.39
1,957,974
350,000
6,207
2008
25,134
8,431
33,565
45.21
1,517,474
350,000
7,742
2007
24,447
8,027
32,474
54.65
1,774,704
350,000
6,404
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
13
Paul Gobeil, FCA
Career profile
Mr. Gobeil is Vice-Chairman of the Board of Metro Inc. He has been a member of the Ordre des comptables agréés du Québec
since 1965, and a Fellow since 1986. Elected as a member of the Quebec National Assembly (MNA) for the riding of Verdun in
1985, he was Minister Responsible for Administration and President of the Treasury Board and subsequently Minister of
International Affairs in the Quebec government until 1989. From 1974 to 1985, he held a number of positions at Provigo Inc.,
including Vice-President, Finance and Administration.
Throughout his career, Mr. Gobeil has been a member of a number of boards of directors as well as economic, social and cultural
organizations. He served as Chairman of the Board of Université de Sherbrooke from 2000 to 2003 and chaired its foundation
from 1997 to 2001. He also chaired the Business Advisory Council of the Asia-Pacific Economic Cooperation (APEC) Forum in
1997.
Age: 67
Ottawa, Ontario, Canada
Director since February 1994
Independent
Areas of expertise:
––
––
––
Finance and control
Governance
and its committees
Meetings attended
Board member
20/21
95%
Chair and member of the ARMC
12/13
92%
Member of the CRCGC
4/5
80%
36/39
92%
Director/Trustee
Metro Inc.
1990 to date
• Vice-Chairman of the Board of Directors
• Member of the Executive Committee
Yellow Pages Income Fund
2004 to date
• M
Nominating Committee
DiagnoCure Inc.
2005 to date
• Member of the Audit and Risk Management
Committee
MDN inc.
2009 to date
• Member of the Human Resources,
Governance and Nomination Committee
1992 to 2008
–
E xport Development Canada
2002 to 2007
–
Hudson’s Bay Company(1)
2003 to 2006
–
Canam Group Inc.
Securities held
(as at October 31)
Year
Common
Shares
DSUs 2009
12,943
29,334
42,277
56.39
2,384,000
350,000
6,207
2008
12,227
26,158
38,385
45.21
1,735,386
350,000
7,742
2007
11,519
23,259
34,778
54.65
1,900,618
350,000
6,404
(1) Hudson’s Bay Company became a private company in 2006.
14
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Total
Common
Shares
and DSUs
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
Louise Laflamme
Career profile
Ms. Laflamme is a Corporate Director. She was Senior Vice-President and Advisor to the President and Chief Executive Officer
of the Montréal Exchange Inc.(1) until her departure on June 30, 2008, after 11 years with this exchange dedicated to the
development of the Canadian derivatives market. In this capacity, Ms. Laflamme served as Chief Financial Officer and was
also responsible for human resources and administration.
An accountant by training, Ms. Laflamme has been a member of the Ordre des CGA du Québec since 1977. Her professional
background includes 12 years at the accounting firm Raymond, Chabot, Martin, Paré & Co.(2) and various internal audit and
financial management positions at companies in a number of sectors.
Age: 57
Rosemere, Quebec, Canada
and its committees
Meetings attended
Board member
21/21
100%
Director since November 2008
Member of the ARMC
13/13
100%
34/34
100%
Independent
Areas of expertise:
––
––
––
Derivatives
Finance and control
Regulatory corporate management
Director
–
–
Securities held
(as at October 31)
Year
2009
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Common
Shares
DSUs Total
Common
Shares
and DSUs
1,070
608
1,678
56.39
94,622
350,000
6,207
Minimum required
($) Shares/DSUs
2008
200 (3)
–
200
45.21
9,042
350,000
7,742
2007
–
–
–
–
–
350,000
6,404
Meets the
Bank’s share
ownership
requirements
for directors
No
Five-year
grace period
after taking
office
to meet
requirements
(1) Further to the combination of Montréal Exchange Inc. and TSX Group Inc. on May 1, 2008, this company is now called TMX Group Inc.
(2) This accounting firm is now known as Raymond Chabot Grant Thornton and Co. (LLP).
(3) Ms. Laflamme owned Common Shares of the Bank prior to her appointment on November 3, 2008.
15
Roseann Runte
Career profile
Ms. Runte has served as President and Vice-Chancellor of Carleton University in Ottawa since July 1, 2008. She also served
as President of Old Dominion University in Norfolk, Virginia from 2001 to 2008 and as President of Victoria University in the
University of Toronto from 1994 to 2001. She is the author of many books and articles, notably on education and economic
and cultural development.
Ms. Runte is a member of the Executive Advisory Council of SunGard Higher Education Inc. and a director of LifeNet Health.
She has also served on various boards of directors in the literary, cultural and economic development sectors.
Age: 62
Ottawa, Ontario, Canada
Director since April 2001
Independent
and its committees
Meetings attended
Board member
21/21
100%
Member of the CRCGC
5/5
100%
Member of the IC
1/1
100%
27/27
100%
Areas of expertise:
––
––
––
Academia
Director
The Jean Coutu Group (PJC) Inc.
2004 to 2006
–
Securities held
(as at October 31)
Common
Shares
DSUs 2009
4,169
11,656
15,825
56.39
892,372
350,000
6,207
2008
3,616
9,899
13,515
45.21
611,013
350,000
7,742
2007
3,086
8,160
11,246
54.65
614,594
350,000
6,404
Year
16
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Total
Common
Shares
and DSUs
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
Marc P. Tellier
Career profile
Mr. Tellier has been President and Chief Executive Officer of Yellow Pages Group Co., Canada’s largest directories publisher,
since 2001. He was previously President and Chief Executive Officer of Bell ActiMedia Inc. Since 2003, he has led acquisitions
totalling $4.5 billion. He has held a number of management positions in sales and finance throughout his career, including
Senior Vice-President – Partnership Development at Bell Canada. He was also President and Chief Executive Officer of
Sympatico-Lycos Inc., the leading Canadian Internet portal. In 2000, Mr. Tellier was named one of Canada’s Top 40 Under
40TM.
In addition, Mr. Tellier serves on the board of directors of the Yellow Pages Association (YPA) and the Sainte-Justine Hospital
Foundation, and is also a member of the Canadian Council of Chief Executives.
Age: 41
and its committees
Meetings attended
Board member
20/21
Member of the HRC
5/5
Independent
95%
100%
25/26
96%
Areas of expertise:
––
––
––
Finance
Telecommunications and media
Director/Trustee
Yellow Pages Income Fund
2003 to date
–
YPG Holdings Inc.
2003 to date
–
Securities held
(as at October 31)
Share
price
($)
Total market
value of
Common
Shares and
DSUs ($)
Common
Shares
DSUs Total
Common
Shares
and DSUs
2009
1,630
5,182
6,812
56.39
384,129
350,000
6,207
2008
1,142
3,810
4,952
45.21
223,880
350,000
7,742
2007
666
2,554
3,220
54.65
175,973
350,000
6,404
Year
Minimum required
($) Shares/DSUs
Meets the
Bank’s share
ownership
requirements
for directors
Yes
17
Louis Vachon
Career profile
Mr. Vachon has been President and Chief Executive Officer of the Bank since June 2007. He is responsible for the strategies,
orientations and development of National Bank Financial Group. From August 2006 to May 2007, he held the position of Chief
Operating Officer of the Bank responsible for all its operating units. He was Chairman of the Board of Natcan Investment
Management Inc. from November 2004 to September 2006, and of National Bank Financial from January 2005 to September
2006. From September 2005 to September 2006, he also held the position of President and Chief Executive Officer of National
Bank Financial Inc. In 1986, he joined Lévesque Beaubien Geoffrion Inc., now National Bank Financial Inc., where he served
as Vice-President until 1990. From 1990 to 1996, he was employed by BT Bank of Canada, the Canadian subsidiary of Bankers
Trust, where he served as President and Chief Executive Officer from 1994 to 1996. Mr. Vachon returned to the Bank in 1996
and, in 1997, he was appointed Senior Vice-President – Treasury and Financial Markets.
Age: 47
Beaconsfield, Quebec, Canada
Mr. Vachon has a Master’s in International Finance from The Fletcher School. In 2001, he was also named one of Canada’s
Top 40 Under 40TM. He has served on the board of directors of the Canadian Council of Chief Executives since June 2009.
Mr. Vachon is a member of the boards of directors of the following Bank subsidiaries: National Bank Group Inc., National
Bank Acquisition Holding Inc. and Natcan Acquisition Holdings Inc.
Non-independent
Areas of expertise:
––
––
––
Finance
Financial services
and its committees
Meetings attended
Board member
21/21
21/21
100%
100%
Director
Montréal Exchange Inc.(1)
–
2000 to 2008
Securities held (2)
(as at October 31)
Year
Common
Shares
Share price
($)
Total market value of
Common Shares
($)
2009
33,320
56.39
1,878,915
2008
16,512
45.21
746,508
2007
15,946
54.65
871,449
Meets the Bank’s share
ownership requirements (3)
Yes
(1) Further to the combination of Montréal Exchange Inc. and TSX Group Inc. on May 1, 2008, this company is now called TMX Group Inc.
(2) A s an executive director of the Bank, Mr. Vachon does not receive any compensation for participating in the activities of the Board and
its committees. For more information on Mr. Vachon’s compensation, including the value of his PSUs, RSUs and options, please refer to
Section 7 of this Circular.
(3) For more information, please refer to “Share Ownership Requirements” in Section 6 of this Circular.
18
To the knowledge of the Bank, no director nominee is, at the date of this
Circular, or has been, during the 10 years prior to the date of this Circular, a
director, chief executive officer or chief financial officer of any company,
including the Bank, that while the nominee was acting in such capacity, or
after the nominee ceased to act in such capacity, and as a result of an event
which occurred while the nominee was performing his or her duties, was the
subject of one of the following orders that was in effect for more than 30
consecutive days, namely, any cease trade or similar order or any order that
denied it access to any exemption under securities legislation.
To the knowledge of the Bank, no director nominee is, at the date of this
Circular, or has been, in the 10 years prior to the date of this Circular, a director
or executive officer of any company, including the Bank, that while the nominee
was acting in such capacity or within a year of the nominee ceasing to act in
such capacity, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency, or became subject to, or instituted any
proceedings, arrangement or compromise with creditors, or had a receiver,
receiver manager or trustee appointed to hold its assets, except for:
––
––
––
––
André Caillé, who, until July 21, 2009, served on the board of directors
of Quebecor World Inc., a company placed under the protection of the
Companies’ Creditors Arrangements Act (Canada) and Chapter 11 of
Title 11 (Bankruptcy) of the United States Code on January 21, 2008.
Quebecor World Inc. was delisted from the New York Stock Exchange
on January 22, 2008. Quebecor World Inc. emerged from court protection
in the United States and in Canada on July 21, 2009. This entity is now
known as World Color Press Inc. and its shares are listed on the Toronto
Stock Exchange;
Gérard Coulombe, who, until September 28, 2005, was a board member
of Centre International de Gestion de Projets G.P., a non-profit company
adjudged bankrupt on September 29, 2005. Centre International de
Gestion de Projets G.P. was discharged from bankruptcy on
April 4, 2008;
Marcel Dutil, who, until March 2004, served on the board of Total
Containment, Inc., a company placed under the protection of Chapter 11
of Title 11 (Bankruptcy) of the United States Code on March 4, 2004.
Total Containment’s bankruptcy file was closed on July 30, 2009; and
Paul Gobeil, who, until November 12, 2001, was on the boards of BridgePoint International Inc. and its wholly owned subsidiary BridgePoint
International (Canada) Inc. On January 25, 2002, BridgePoint International (Canada) Inc. filed a proposal with its creditors. The Toronto Stock
Exchange suspended trading on the shares of BridgePoint International
Inc. on January 31, 2002 for failure to meet Toronto Stock Exchange
listing requirements. The shares of BridgePoint International Inc. were
delisted from the Toronto Stock Exchange at the close of business on
January 31, 2003. Moreover, an interim receiver was appointed from
February 13 to March 3, 2003. BridgePoint International (Canada) Inc.
was discharged from the proposal on December 17, 2003.
In addition, to the knowledge of the Bank, no director nominee has, in
the 10 years prior to the date of this Circular, become bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency, or become
subject to, or instituted any proceedings, arrangement or compromise with
creditors, or had a receiver, receiver manager or trustee appointed to hold
the assets of the nominee.
Furthermore, to the knowledge of the Bank, no director nominee has
been subject to any penalties or sanctions imposed by a court relating to
securities legislation or by a securities regulatory authority, or has entered
into a settlement agreement with a securities regulatory authority, or has
been subject to any other penalties or sanctions imposed by a court or
regulatory body that would likely be considered material to a reasonable
investor in deciding whether to vote for a nominee. Moreover, in the opinion
of the Bank, no disclosure concerning a settlement agreement entered into
by a director nominee before December 31, 2000 is likely to be considered
material to a reasonable investor in deciding whether to vote for a nominee
except for the following disclosure:
––
Under an administrative settlement agreement approved by a panel of
the Toronto Stock Exchange in August 1998, Lawrence S. Bloomberg
agreed to pay a $250,000 fine, not as a result of any personal misconduct,
but as President and Chief Executive Officer of First Marathon Securities
Limited for compliance inadequacies in 1993, 1994 and 1995, and
issues arising from the participation of certain officers and employees
of that company in matters relating to the financing, sale of securities
and operations of Cartaway Resources Corp. between July 1995 and
June 1996.
19
Independence of Director Nominees
Outside Directorships
The following table outlines the independence, as defined in the standards
established by the CSA, of director nominees, as at the date of this Circular.
The Bank discloses the list of reporting issuers and public and parapublic
corporations on whose boards each director nominee currently serves or has
served in the previous five years in “Career Profile” in Section 3 of this
Circular.
Reporting issuers with more than one Bank director serving as director
(or trustee), and the committees of the reporting issuer of which the director
is a member, as applicable, are indicated in the table below:
Director nominees
NonIndependent independent
Pierre Bourgie
(ARMC, CRCGC)
André Caillé
(CRCGC Chair, HRC,
ARMC, IC Chair)
√
Louis Vachon
20
Advisor to certain
subsidiaries of the
Bank
√
Reporting issuer
√
Gérard Coulombe
Bernard Cyr
(ARMC, IC)
Shirley A. Dawe
(CRCGC, HRC)
(ARMC)
Jean Douville
(Chairman of the Board)
Marcel Dutil
(HRC, IC)
Jean Gaulin
(HRC Chair, ARMC, IC)
Paul Gobeil
(ARMC Chair, CRCGC)
Louise Laflamme
(ARMC)
Roseann Runte
(CRCGC, IC)
Marc P. Tellier
(HRC)
Reason for
non-independence
Saputo Inc.
√
The law firm of which
he is a partner
provides legal services
to the Bank and some
of its subsidiaries
Yellow Pages
Income Fund
Director/Trustee
Committee(s) of the reporting issuer
on which the director serves
Paul Gobeil
•Corporate Governance and Human Resources
•Corporate Governance and Human Resources
•Corporate Governance
and Nominating
Marc P. Tellier
•Audit
–
Pierre Bourgie
Jean Gaulin
√
Male/Female Representation on the Board
√
The following chart shows the ratio of male/female representation on the
Board assuming all nominees are elected.
√
n Women (4) – 27%
n Men (11) – 73%
√
√
√
√
√
√
√
√
President and Chief
Executive Officer of the
Bank
SECTION 4
INFORMATION ON THE BOARD
The Board’s main duty is to oversee the management of the Bank, safeguard
its assets and ensure its viability, profitability and development. It has also
adopted a mandate which is reproduced in its entirety in Schedule C to this
Circular and may be found under “More About Us” on the Bank’s website
(www.nbc.ca).
The Statement of Corporate Governance Practices in Schedule B to this
Circular presents the Bank’s practices concerning:
i) the Board of Directors;
ii) the committees created by the Board;
iii) the selection of director nominees, election, framework and
compensation;
iv) measures for collecting the views of stakeholders and communicating
with them; and
v) procedures for reporting irregularities.
Highlights of Fiscal 2009
During the fiscal year ended October 31, 2009:
––
––
––
––
Composition of the Board and independence – The Board was composed
of 15 directors, 12 of whom are independent. The three non-independent
directors are Louis Vachon, Lawrence S. Bloomberg and Gérard
Coulombe. For more information concerning the independence of
director nominees, please refer to the table “Independence of Director
Nominees” in Section 3 of this Circular. For more information concerning
the independence of directors, please refer to the Statement of Corporate
Governance Practices in Schedule B to this Circular;
Attendance – The directors attended, on average, 99% of the meetings
of the Board and 93% of the meetings of the committees on which they
serve, as described in the respective career profiles of each director
nominee in Section 3 of this Circular;
Continuing education – The directors attended training sessions on the
Basel II Accord, the CSA’s proposed changes to the corporate governance
regime, the Principles for Sound Compensation Practices set out by the
Financial Stability Board, IFRS, the Internal Capital Adequacy Assessment
Process (ICAAP), the new executive compensation disclosure rules and
Financial Stability Board requirements. They also attended presentations
on the operations of the Financial Markets sector, National Bank Trust
Inc. and Natcan Trust Company Inc.
Assessment process – The Board’s assessment process was conducted
in the form of one-on-one meetings between each director and Jean
Douville, the Chairman of the Board. At the meetings, the directors had
the opportunity to discuss with him their thoughts on the performance
of the Board, the Board committees on which they serve, the Chairs of
each Board committee and their own contribution. Each director also
submitted to André Caillé, Chair of the CRCGC, their comments on the
performance of the Chairman of the Board. Mr. Caillé was also available
to meet with directors who wished to discuss the Chairman’s performance.
Further to these one-on-one meetings, the CRCGC held a meeting to
review and discuss the comments gathered from the one-on-one
meetings, and assessed the relevance of changing or improving the
performance and effectiveness of the Board, the Board committees, the
Chairman of the Board, the committee Chairs and each director. The
CRCGC then reported to the Board.
Compensation of Directors of the Bank and its Subsidiaries
for the Fiscal Year Ended October 31, 2009
The table below presents the compensation paid to the Bank’s directors for
serving on the boards of directors and board committees of the Bank and its
subsidiaries. The retainer paid to the members of the Bank’s Board and its
committees did not increase during the fiscal year ended October 31,
2009.
Aside from a portion that must be paid in Common Shares of the Bank,
directors’ annual retainers are paid in cash, Common Shares or DSUs, or a
combination of the three. A DSU is a right that has a value equal to the market
value of a Common Share of the Bank at the time the DSUs are credited, i.e.,
quarterly, to an account in the director’s name. Additional DSUs calculated
in proportion to the dividends paid on the Common Shares are credited to
the director’s account. DSUs can only be redeemed when the director leaves
the Board.
Moreover, directors do not benefit from any banking product or service
at preferred rates or reduced fees related exclusively to their status as directors,
except for a credit card with no annual fees. The Bank and its subsidiaries
also reimburse directors for expenses incurred to attend meetings, including
transportation and accommodation. The Bank reimburses Mr. Douville up to
$25,000 annually for accommodation expenses in serving as Chairman of
the Board and for his business promotion activities on behalf of the Bank.
Under By-Law I approved by the Bank’s shareholders, the total
compensation that may be paid to directors for serving on the Board and its
committees during a fiscal year may not exceed $1,800,000. During fiscal
2009, this compensation totalled $1,552,250.
For more information on director compensation, please refer to the
Statement of Corporate Governance Practices in Schedule B to this Circular.
In order to maintain the trust of shareholders and ensure that directors’ interests
are aligned with those of shareholders, certain share ownership requirements
have been implemented. Consequently, all directors are required to hold
Common Shares of the Bank or DSUs with a total value equal to or greater than
five times the annual retainer received as a Board member. Directors have five
years from the date they take office to meet these requirements. For more
information, please refer to “Director compensation and share ownership
requirements” in the Statement of Corporate Governance Practices of the Bank
in Schedule B to this Circular.
Requirements
Five times the annual retainer of
Board members(1)
Minimum share ownership
requirements based on the closing
price of the Bank’s Common
Shares on the Toronto Stock
Exchange on October 31, 2009(2)
Minimum required
5 X $70,000 = $350,000
$350,000 / $56.39 = 6,207
Common Shares
(1) At the close of the fiscal year ended October 31, 2009, 14 of the 15 directors of the Bank
met the share ownership requirements for directors. The director who did not meet these
requirements has held her position for less than five years.
(2) As October 31, 2009 was not a business day, this is the closing price of the Common
Shares of the Bank on the Toronto Stock Exchange on the previous business day, namely,
October 30, 2009.
21
section 4 INFORMATION ON THE BOARD (cont.)
Compensation of the Directors of the Bank and its Subsidiaries for the
Fiscal Year Ended October 31, 2009
National Bank of Canada – Annual compensation for the fiscal year ended
October 31, 2009
Retainer
Board
Cash(1)
$ 45,000 Member
Common Shares
$ 25,000 $200,000 Chairman of the Board
Cash(1)
Committees of the Board
ARMC: Cash(1)
Common Shares
CRCGC and HRC:
Cash(1)
Common Shares
IC(2):
Cash(1)
Common Shares
Meeting fees
ARMC:
Cash(1)
Common Shares
CRCGC and HRC:
Cash(1)
Common Shares
IC(2):
Cash(1)
Common Shares
Member
Committee Chair(3)
$ 12,500 $ 7,500 $ 10,000 $ 5,000 $
875 $
625 $ 1,500 $ 15,000 $ 10,000 $ 12,500 $ 7,500 $ 2,500 $ 1,250 Subsidiaries of National Bank of Canada – Annual compensation for the
fiscal year ended October 31, 2009
Retainer
National Bank Life Insurance Company
Cash
$17,000 Director
Cash
$ 3,000 Committee member
Cash
$ 1,500 Committee Chair
National Bank Trust Inc.
Director
Committee member
Committee Chair
Cash
Cash
Cash
$12,000 $ 2,000 $ 1,000 FMI Acquisition Inc.
Director
Cash
$
Louis Vachon(A)
Marc P. Tellier
Roseann Runte
Louise Laflamme
Paul Gobeil
Jean Gaulin
Marcel Dutil
Jean Douville
Nicole
Diamond-Gélinas
Shirley A. Dawe
Bernard Cyr
Gérard Coulombe
André Caillé
Pierre Bourgie
Lawrence S.
Bloomberg
(1) Excluding the part of director compensation that must be paid in the form of Common
Shares, directors may elect to receive the cash portion of their compensation in the form of
cash, Common Shares, DSUs or a combination of all three. The following table presents the
election made by each director for payment of cash compensation for activities of the Board
and its committees during the fiscal year ended October 31, 2009.
Breakdown of compensation paid (%)
Cash
100
100
100
Common Shares
DSUs
100
–
100
100
50
100
(A) As a Bank executive, Mr. Vachon receives no compensation as a director of the Bank or
any of its subsidiaries.
(2) The compensation of the members and the Chair of the IC is calculated on a quarterly basis.
(3) The Chairs of the Board committees receive compensation as members and Chairs of their
respective committees.
22
100
100
100
100
50
–
100
100
–
500 section 4 INFORMATION ON THE BOARD (cont.)
Director Compensation
The following table presents the total compensation paid during the fiscal year ended October 31, 2009 to the Bank’s directors, in particular for serving on
the boards of directors and board committees of the Bank and its subsidiaries.
Name
Pierre Bourgie
(CRCGC, ARMC)
André Caillé
(CRCGC Chair, HRC, ARMC, IC Chair)
Fees earned(1)
($)
45,000
25,000
67,500
37,500
Louis Vachon(6)
945,741(3)
70,000
65,000
82,375
–
1,015,741
146,750
(4)
32,500
102,500
93,000
93,000
35,000
100,000
90,000
245,000
Total
($)
105,000
146,750
Gérard Coulombe
Bernard Cyr
(ARMC, IC)
Shirley A. Dawe
(CRCGC, HRC)
(ARMC)
Jean Douville
(Chairman of the Board)
Marcel Dutil
(HRC, IC)
Jean Gaulin
(HRC Chair, ARMC, IC)
Paul Gobeil
(ARMC Chair, CRCGC)
Louise Laflamme
(ARMC)
Roseann Runte
(CRCGC, IC)
Marc P. Tellier
(HRC)
All other
Share-based
awards(2) compensation
($)
($)
20,000(5)
110,000
25,000
270,000
86,500
86,500
45,625
128,000
130,000
130,000
90,000
90,000
88,000
88,000
85,000
85,000
–
–
(1) For the purposes of this table and in accordance with paragraph 3(b) of Item 7 of Form 51-102F6 of the CSA’s Regulation 51-102, fees include all fees awarded, earned, paid, or payable in cash
for services as a director, including annual retainer fees, fees for attending meetings of a Board committee or for chairing a Board committee, and meeting fees.
(2) For the purposes of this table and in accordance with paragraph 3.1 of Item 3 of Form 51-102F6 of the CSA’s Regulation 51-102, share-based awards include award amounts set based on the
grant date of fair value of the award of shares and DSUs for the fiscal period in question.
(3) Under a service contract entered into in November 2004 with National Bank Financial Inc., Mr. Bloomberg acts as an advisor to National Bank Financial Inc. and National Bank Financial Ltd. As
such, he receives an annual retainer, commissions, a business development allowance and reimbursement of various administrative fees incurred when carrying out his duties. For the fiscal year
ended October 31, 2009, Mr. Bloomberg received a total of $945,741.
(4) Mr. Coulombe received $17,000 for serving on the board of directors of National Bank Life Insurance, $3,000 as a member of the Ethics Committee of this Bank subsidiary, $12,000 as a member
of the Board of Directors of National Bank Trust Inc. and $500 as a member of the board of FMI Acquisition Inc.
(5) Ms. Diamond-Gélinas received $17,000 for serving on the board of directors of National Bank Life Insurance and $3,000 as a member of the Audit Committee of this Bank subsidiary.
(6) As a Bank executive, Mr. Vachon receives no compensation as a director of the Bank or any of its subsidiaries. For more information about Mr. Vachon’s compensation, including the values of his
PSUs, RSUs and options, please refer to Section 7 of this Circular.
23
section 4 INFORMATION ON THE BOARD (cont.)
Detailed Compensation Paid to Directors of the Bank and its Subsidiaries
Marc P. Tellier
47,500
25,000
25,000
–
45,000
22,500
45,000
45,000
–
12,500
13,750
5,000
5,000
22,500
6,250
10,000
10,000
Total
Roseann Runte
25,000
Louis Vachon(1)
Louise Laflamme
45,000
Paul Gobeil
45,000
Jean Gaulin
70,000
Marcel Dutil
25,000
Jean Douville
25,000
25,000
Shirley A. Dawe
45,000
25,000
Bernard Cyr
45,000
Common Shares
Gérard Coulombe
Pierre Bourgie
Cash
André Caillé
The following table presents the specific compensation paid during the fiscal year ended October 31, 2009 to the Bank’s directors for serving on the boards
of directors and committees of the Bank and its subsidiaries.
Member of the Board ($)
DSUs
45,000
25,000
45,000
25,000
25,000
45,000
45,000
25,000
25,000
45,000
–
Chairman of the Board ($)
Cash
200,000
Member of the HRC, CRCGC and ARMC ($)
Cash
22,500
Common Shares
12,500
DSUs
20,000
17,500
20,000
10,000
32,500
22,500
7,500
5,000
12,500
10,000
12,500
Chair of the HRC, CRCGC and ARMC ($)
Cash
12,500
Common Shares
7,500
DSUs
7,500
12,500
10,000
15,000
Member of the IC ($)
Cash
875
Common Shares
625
DSUs
875
Meeting fees
1,500
625
625
625
875
1,500
1,500
(Common
Shares)
(DSUs)
875
1,500
1,500
(cash)
(DSUs)
Chair of the IC ($)
DSUs
2,500
Common Shares
Total compensation
for the activities of
the Board and its
committees ($)
1,250
70,000
105,000
146,750
70,000
93,000
100,000
90,000
270,000
86,500
Member of the board and committee of a subsidiary ($)
Cash
32,500
20,000
(1) As a Bank executive, Mr. Vachon receives no compensation as a director of the Bank or any of its subsidiaries.
24
128,000
130,000
90,000
88,000
85,000
–
1,552,250
SECTION 5
INFORMATION ON BOARD COMMITTEES
Board Committees
In performing its duties, the Board is assisted by three standing committees:
the CRCGC, the ARMC, and the HRC. The Board may also create ad hoc committees
for specific purposes, whenever the situation so requires.
With the assistance of the CRCGC, the Board develops and approves
mandates describing the role and responsibilities of each of its committees.
The text of the mandate of each committee can be found in its entirety under
“More About Us” on the Bank’s website (www.nbc.ca) and in its Annual
Information Form, which was filed on December 10, 2009 on the SEDAR
website (www.sedar.com) in the case of the mandate of the ARMC. The
Statement of Corporate Governance Practices in Schedule B to this Circular
contains additional information on the Board’s committees, namely, their
authority to retain the services of legal counsel and other independent
advisors.
The Board’s committees are composed exclusively of independent
directors. At each regular committee meeting, the members meet in camera,
without the members of the Bank’s management who are invited from time
to time to attend these meetings. The list of committee members appears in
the description of each committee in this section of the Circular.
Independent Committee
In August 2007, the Board set up a committee composed entirely of independent
directors, as defined in the standards established by the CSA. Its mandate was
to review the circumstances surrounding the liquidity problems in the ABCP
market, assess the consequences for the Bank and its subsidiaries, and
recommend to the Board measures to be taken to safeguard the interests of the
Bank and its shareholders. The Independent Committee is composed of André
Caillé, its Chair, Bernard Cyr, Marcel Dutil, Jean Gaulin and Roseann Runte.
Conduct Review and Corporate Governance Committee
Members
Pierre Bourgie
André Caillé, Chair
Shirley A. Dawe
Paul Gobeil
Roseann Runte
Independence of Members
The CRCGC is composed entirely of independent directors, as defined in the
standards established by the CSA and meets without members of the Bank’s
management being present at each of its regular meetings. For more information
on the concepts of independent directors and conflicts of interest, please
refer to the Statement of Corporate Governance Practices in Schedule B to
this Circular.
Role of the Conduct Review and Corporate Governance Committee
In addition to assuming the responsibilities assigned to it under the Act, the
CRCGC assists the Board in overseeing implementation of and compliance
with the Bank’s corporate governance rules, policies and procedures, and in
keeping abreast of legislative and regulatory changes relating to
governance.
The main duties and responsibilities of the CRCGC are as follows:
Composition and function of the Board and its committees
Make recommendations regarding the size and composition of the
––
Board;
Develop and periodically revise the selection criteria for electing or
––
re-electing directors set out in the Charter of Expectations and ensure
succession planning for directors;
Draw up the list of director nominees for each of the Bank’s annual
––
meetings;
Assess, on an annual basis, the independence of directors who are
––
standing for re-election;
Review the mandates of the Board, the Board committees and the
––
committee Chairs; and
Make recommendations to the Board regarding director
––
compensation.
Oversight of governance matters
Prepare the Bank’s governance rules, policies and procedures;
––
––
Review and approve the standards of conduct and ethical behaviour,
including the Code of Professional Conduct applicable to directors,
officers and employees of the Bank;
Ensure that controls are in place for adequate management and
––
monitoring of related party transactions at the Bank; and
Ensure that measures are in place to obtain feedback from stakeholders
––
to make sure that the Bank communicates effectively with its
shareholders.
Assessment of the Board, its committees and directors
Establish a process for assessing the performance and effectiveness
––
of the Board overall, its committees, the Chairman of the Board, the
Chairs of the Board committees and the directors; and
––
Ensure that orientation and continuing education programs for directors
are in place.
The duties and responsibilities of the CRCGC are described more fully
in its mandate, which is revised regularly. The text of the mandate can
be found in its entirety under “More About Us” on the Bank’s website
(www.nbc.ca).
The members of the CRCGC met five times during the past fiscal year.
In addition to the matters identified at the beginning of the year and its
duties under its mandate, the CRCGC dealt with ad hoc files. In particular,
it:
Revised all of the mandates of the Board, the Board committees and
––
the Chairs of the Board committees. Specifically, it changed its name
in French from “Comité de révision et de régie d’entreprise” to “Comité
de révision et de gouvernance” effective October 29, 2009;
Revised the selection criteria for electing or re-electing directors,
––
including the Bank’s policy to seek to achieve parity between men and
women on the Board;
Introduced an action plan on determining succession for the Board and
––
renewing the composition of the Board, particularly by establishing an
evergreen list of director nominees; and
Revised the continuing education program for directors, taking into
––
account, among other things, the interest shown by Board members for
certain topics, the legislative and regulatory changes affecting the Bank,
financial services industry practices, the economic environment and
the nature of the operations of the Bank and its subsidiaries.
25
section 5 INFORMATION ON BOARD COMMITTEES (cont.)
Audit and Risk Management Committee
––
––
Obtain reasonable assurance that the Bank has the policies, programs,
procedures, structures and management systems required to comply
with legislation and other requirements to which the Bank is subject
and see that they are operational and aligned with sound industry
practices; and
Review any certifications and reports that may be required by regulatory
authorities and that come under its purview.
The ARMC also assumes the following responsibilities:
Members
Pierre Bourgie
André Caillé
Bernard Cyr
Jean Gaulin
Paul Gobeil, Chair
Louise Laflamme
Independence and Financial Literacy of Members
The ARMC is composed entirely of independent directors, as defined in the
standards established by the CSA, and meets without the members of the
Bank’s management being present at each of its regular meetings. For more
information on the concepts of independent directors and conflicts of interest,
please refer to the Statement of Corporate Governance Practices in Schedule B
to this Circular.
The Board has determined that all the members of the ARMC are “financially
literate” within the meaning of CSA rules relating to audit committees. All ARMC
members have acquired the necessary experience and knowledge to adequately
fulfill their duties as ARMC members from having served as chief executive
officers or directors of other corporations or through their academic background.
Several of them serve or have served on the audit committees of various
corporations. For more information about the expertise and experience of each
member of the ARMC, please refer to the Information on the Audit and Risk
Management Committee of the Board of Directors section of the Bank’s Annual
Information Form, filed on December 10, 2009 on the SEDAR website
(www.sedar.com) and on the Bank’s website (www.nbc.ca).
Role of the Audit and Risk Management Committee
The ARMC assists the Board in audit and risk management matters.
The main duties and responsibilities of the ARMC are as follows:
––
––
––
––
––
––
26
Review the consolidated financial statements of the Bank and the
external auditors’ reports thereon, the management reports, financial
reporting and disclosure processes, audit processes, management
information systems, the documents designated by the Superintendent
and all other material financial information in order to ensure their
integrity, the effectiveness of processes and compliance with applicable
accounting standards;
Review the annual report on all claims that could have a material impact
on the Bank’s financial statements;
Act as an intermediary between the Board and the Bank’s independent
oversight functions, namely, Internal Audit, Corporate Compliance and
the external auditors;
Supervise the work of Internal Audit and Corporate Compliance;
Review recommendations made by regulatory authorities and the
external and internal auditors;
Carry out a review of risk management and risk management controls;
Finance and Corporate Compliance
––
Recommend to the Board the appointment and compensation of the
external auditors, or their dismissal, if applicable, and confirm the nature
and scope of their mandate;
Review the independence of the external auditors and the partner
––
responsible for the mandate at the Bank and his team;
Assess from time to time the overall performance of the external auditors
––
and the partner responsible for the mandate at the Bank and his team,
including their qualifications, support and communication skills;
discuss the rotation procedure of the partners on the audit team; and
Provide prior approval of all mandates given to external auditors, in
––
accordance with the Guidelines for the Management of Services Provided
by the External Auditors.
Risk Management
Review and recommend to the Board the adoption of policies for
––
managing the material risks to which the Bank is exposed, and review
those policies periodically; and
Approve the credits that exceed the powers delegated to Bank officers
––
and which are defined in the credit risk management policies of the
Bank.
The duties and responsibilities of the ARMC are described more fully in
its mandate, which is revised regularly. The text of the mandate can be found
in its entirety under “More About Us” on the Bank’s website (www.nbc.ca)
and in the Bank’s Annual Information Form filed on December 10, 2009 on
the SEDAR website (www.sedar.com).
The members of the ARMC met 13 times during the past fiscal year.
In addition to the matters identified at the beginning of the year and its
duties under its mandate, the ARMC dealt with ad hoc files. In particular, it:
––
––
Formally assessed the effectiveness and contribution of the external
auditors, including their qualifications, support and communication
skills. After the assessment, the ARMC recommended to the Board that
SB/DT be reappointed as the auditors of the Bank for the fiscal year
ending October 31, 2010. The ARMC also examined the proposal for
the rotation of the signing partner at SB/DT for the fiscal year ending
October 31, 2010; and
Followed up on the Bank’s transition plan to IFRS.
The following terms are used for the purposes of Sections 5, 6 and 7
of this Circular pertaining to the HRC, the Named Executive Officers
and their compensation.
The Bank’s management (as at October 31, 2009):
the President and Chief Executive Officer and the members of
the Office of the President, namely:
the Chief Financial Officer and Executive Vice-President –
––
Finance, Risk and Treasury;
the Executive Vice-President – Wealth Management and
––
Co-President and Co-Chief Executive Officer, NBF;
the Executive Vice-President – Financial Markets and
––
Co-President and Co-Chief Executive Officer, NBF;
the Executive Vice-President – Personal and Commercial
––
Banking;
the Senior Vice-President – Strategic Initiatives Office;
––
––
the Senior Vice-President – Operations;
––
the Senior Vice-President – Technology, Business Intelligence
and Organizational Performance; and
the Senior Vice-President – Human Resources and Corporate
––
Affairs.
––
Named Executive Officers:
“Named Executive Officers” means the President and Chief
––
Executive Officer, the Chief Financial Officer and the three most
highly compensated members of the Bank’s management as
defined in Regulation 51-102 of the CSA, namely:
Louis VachonPresident and Chief Executive
Officer
Patricia Curadeau-GrouChief Financial Officer and
Executive Vice-President –
Finance, Risk and Treasury
Ricardo Pascoe
Executive Vice-President
Financial Markets and Co-President
and Co-Chief Executive Officer, NBF
Luc PaiementExecutive Vice-President
Wealth Management and
Co-President and Co-Chief
Executive Officer, NBF
Réjean LévesqueExecutive Vice-President
Personal and Commercial Banking
Members
André Caillé
Shirley A. Dawe
Marcel Dutil
Jean Gaulin, Chair
Marc P. Tellier
Mandate of the Human Resources Committee
The HRC assists the Board in the exercise of its duties relating to human
resources. In addition, the HRC ensures that the compensation policies and
programs implemented are conducive to achieving the Bank’s strategic and
financial objectives without, however, compromising its viability, solvency or
reputation. The main duties and responsibilities of the HRC are described
below.
Compensation Policies, Programs and Practices
Review, approve and recommend to the Board that it approve the Bank’s
total compensation policies and programs, including equity incentive
plans and other employment conditions and staff benefits;
Ensure that the Bank’s compensation policies, programs and practices
––
are in compliance with the regulations and standards in effect; and
Ensure that the compensation paid to Executives of the Bank and its
––
designated subsidiaries is closely tied to shareholders’ long-term
interests and to do so, ensure regular follow-up of share ownership
requirements.
––
Review and approve the description of the duties of the President and
––
Chief Executive Officer;
Set the annual key performance indicators and objectives linked to the
––
compensation of the President and Chief Executive Officer;
Appraise, on an annual basis, the accomplishments and performance
––
of the President and Chief Executive Officer with respect to the annual
key performance indicators as well as the prudence with which he has
managed the Bank’s operations and the risks to which the Bank is
exposed, and report thereon to the Board; and
Approve and recommend to the Board that it approve the compensation
––
of the President and Chief Executive Officer.
Executives:
“Executives” means the members of the Bank’s management,
the Senior Vice-Presidents and the Vice-Presidents of the Bank,
all direct reports of the members of the Bank’s management who
are employees of Bank subsidiaries, as well as any employees
of the Bank whom the HRC considers to hold an equivalent
function.
––
27
Members of the Office of the President
Receive and review, on an annual basis, the report of the President and
Chief Executive Officer on the performance of the members of the Office
of the President and the prudence with which they have managed the
Bank’s operations; and
Approve and recommend to the Board that it approve the compensation
––
of the members of the Office of the President.
The President and Chief Executive Officer, Louis Vachon, and the Senior
Vice-President – Human Resources and Corporate Affairs, Lynn Jeanniot, are
invited to attend the meetings of the HRC. They are not, however, entitled to
vote on any item, they must withdraw from the meeting when requested and
are not part of discussions concerning their own compensation.
Succession Planning
Periodically review the profile of Executives possessing the necessary
––
competencies to hold senior management positions as well as the
executive succession and development plan, and assist the Board in
monitoring the succession planning process; and
Review the general terms and conditions of all agreements signed
––
between the Bank and a member of the Bank’s management in the event
of termination or change of control.
The HRC met five times during the fiscal year. In addition to the matters
scheduled in its work plan and its responsibilities under its mandate, the HRC
dealt with ad hoc files. The table below presents the main topics discussed
by the members during the past fiscal year.
––
Pension Plan
Ensure oversight of the pension plans of the Bank and its subsidiaries
––
and of the Pool Fund for Participating Pension Plans of the Bank.
Work Plan and Achievements During the Fiscal Year
Meeting
––
Review of the report of the President and Chief Executive Officer on the
performance of the other members of the Bank’s management
––
Review of the financial results achieved and approval of the short-term
variable compensation envelopes and the mid- and long-term
compensation awards for all employees, including those for the Bank’s
management. Recommendation to the Board for approval
––
Review of the 2008-2009 variable compensation program applicable to
the majority of Executives and employees
––
Review of the variable compensation program for Executives in the
Financial Markets sector
––
Review of the variable compensation program for branch managers of
NBF Individual Investor Services and recommendation to the Board for
approval
––
Approval of the 2008-2009 key performance indicators for the President
and Chief Executive Officer
––
Review of the succession plan for Executives
––
Approval of the 2007-2008 Report of the HRC presented in the
Management Proxy Circular dated January 9, 2009
––
Review of the 2008-2009 salary policy for all personnel and
recommendation to the Board for approval
––
Review of short-, mid- and long-term variable compensation programs
of the Bank in order to ensure that the composition of these programs
supports the Bank’s short-, mid- and long-term performance and growth
targets and that they are competitive
––
Review of the changes to be made to the 2008-2009 variable
compensation program applicable to the majority of Executives and
employees and recommendation to the Board for approval
––
Review of the changes to be made to the variable compensation program
for Executives of the Financial Markets sector and recommendation to
the Board for approval
––
Review of an amendment to the Stock Option Plan and recommendation
to the Board for approval
––
Review of the diversity of the Bank’s workforce as at December 31,
2008
The duties and responsibilities of the HRC are described more fully in
its mandate, which is revised regularly. The text of the mandate can be found
in its entirety under “More About Us” on the Bank’s website (www.nbc.ca).
Independence and Competencies of Members
28
Main subjects covered
Review of the 2007-2008 performance of the President and Chief
Executive Officer
Shareholder Disclosure
Disclose clearly to shareholders the Board’s approach to compensation
––
of the Bank’s management, particularly through the statement of
compensation of the Named Executive Officers, which presents the
Compensation Discussion and Analysis as well as the decisions made
by the HRC, as required under applicable securities legislation and
Toronto Stock Exchange rules.
The HRC is composed entirely of independent directors, as defined in the
standards established by the CSA. For more information about this subject,
please refer to the Statement of Corporate Governance Practices in Schedule B
to this Circular.
The HRC has put in place procedures to ensure its independence from
the Bank’s management and to have access to relevant information. The HRC
members therefore meet in camera, without members of the Bank’s management
being present, at each of their regular meetings. This practice was followed
at each of the five regular meetings in 2009. They may communicate directly
with the Senior Vice-President – Human Resources and Corporate Affairs, or
any other member of management, should they deem it appropriate. The HRC
may also inquire about any question it deems relevant and, to that end, has
full access to the books, records, premises, management and employees of
the Bank, including Risk Management and independent oversight functions,
such as Internal Audit and Corporate Compliance. In addition, the HRC may
hire, whenever it deems appropriate, independent consultants to help it carry
out its duties. For more information, please refer to “Independent External
Consultants” in this section of the Circular.
All HRC members have the experience and knowledge in the area of
human resources and executive compensation needed to properly fulfill their
mandate as a result of their serving or having served in such roles as chief
executive officers or senior leaders within large corporations.
December ––
2008
February
2009
Meeting
Main subjects covered
May
2009
––
Review of the PSU Plan proposed to replace the RSU Plan for the eligible
members of the Bank’s management and recommendation to the Board
for approval
––
Review of the changes to be made to the various components of the total
compensation of the Executive Vice-President – Financial Markets and
Co-President and Co-Chief Executive Officer, NBF and recommendation
to the Board for approval
––
Review of the shareholder disclosure process and the advisory vote on
the approach to executive compensation
––
Review of the Principles for Sound Compensation Practices set out by
the Financial Stability Board
––
Approval of the semi-annual short-term variable compensation envelopes
for certain groups of employees and recommendation to the Board for
approval
––
Review and approval of the financial statements and actuarial valuation
of the pension plans of the Bank
––
Appointment of the external auditors of the pension plans of the Bank
and setting of their remuneration
––
Review of the competitiveness of the base salaries of Executives and
recommendation to the Board for approval
––
Review of variable compensation programs of the Financial Markets
sector in accordance with the Principles for Sound Compensation
Practices set out by the Financial Stability Board
––
Review of the new executive compensation disclosure standards
––
Discussion on the consultations requested by the Superintendent and
the Canadian Coalition for Good Governance
––
Follow-up on the shareholder disclosure process and the advisory vote
on the approach to executive compensation
––
Review of the changes to be made to the variable compensation programs
of the Financial Markets sector and recommendation to the Board for
approval
––
Review of a draft of Section 6 “Compensation Discussion and Analysis”
of the Circular
––
Review of the orientation of the pension plans of the Bank and its
subsidiaries
––
Revision of the description of the duties of the President and Chief
Executive Officer
––
Revision of the mandate of the HRC and the mandate of the HRC Chair
––
Discussion on the consultations with the Superintendent and the
Canadian Coalition for Good Governance
––
Follow-up on the shareholder disclosure process and the advisory vote
on the approach to executive compensation
August
2009
October
2009
Independent External Consultants
The HRC has the authority to retain the services of independent external
consultants who provide it with necessary information on market trends and
best practices regarding compensation policies and programs as well as the
competitiveness of the compensation of the Bank’s management. The HRC
is thus kept well informed so that it can make sound decisions that can also
take into account factors other than the information and recommendations
of the external consultants.
During the past fiscal year, the HRC retained the services of Hay Group
Limited (“Hay Group”) for information concerning best market practices with
respect to mid-term variable compensation programs. The Hay Group also
submitted a comparative analysis of the compensation of the Bank’s
management relative to that paid by companies in the Bank’s peer group.
Each year the Bank takes part in different compensation surveys conducted
by the Hay Group on market practices and compensation levels for management
and non-management positions at the Bank.
At the beginning of each fiscal year, the Bank submits to the HRC for
approval the list of compensation-related mandates that must be given to
external consultants during the year. The HRC also reviews the fees paid to
external consultants for the mandates performed for the Bank and verifies
that the scope of such mandates does not adversely affect their status as
independent consultants of the HRC.
The following table presents the fees paid to the Hay Group in the past
two fiscal years.
Advisory services to the HRC
Advisory services to the Bank
Fees
paid in 2009
($)
Fees
paid in 2008
($)
52,452
20,750
71,773
18,076
Compensation Governance
The HRC ensures that the compensation policies, programs and practices are
in compliance with the regulations and standards in effect and considers the
relevant risk management framework when they are prepared, revised and
applied. The HRC feels that the Bank’s policies, programs and practices as
well as the governance practices of the Board and the HRC adequately ensure
that the compensation paid to the Bank’s management is closely tied to the
Bank’s financial performance and shareholder return.
In order to reinforce its good governance practices with respect to
compensation, the HRC recently approved changes to the annual bonus
program for Executives and specialists of the Financial Markets sector for
fiscal 2009 and fiscal 2010. These changes take the Financial Stability Board’s
standards into account and are summarized in the following table.
29
Elements
Fiscal 2009 program before changes
Changes in effect in fiscal 2009
Changes effective in fiscal 2010
Deferred annual
bonus awarded in
the form of RSUs
Bonuses under $250,000 not deferred
Idem
Bonuses under $100,000 not deferred
Above this threshold, the percentage of the
bonus deferred varies as follows:
$250,000 – $500,000 = 20%
$500,000 – $750,000 = 25%
$750,000 and over = 30%
$250,000 – $400,000 = 30%
$400,000 – $1 million = 35%
$1 million and over = 40%
$100,000 – $400,000 = 30%
$400,000 – $1 million = 35%
$1 million and over = 40%
Executives’ deferred bonus is calculated on the
total bonus value and represents 1/3 of their
total bonus
Executives’ deferred bonus is calculated on the
total bonus value and represents 40% of their
total bonus
Idem
The total compensation of the Executive Vice-President – Financial Markets and Co-President and CoChief Executive Officer, NBF was revised in fiscal 2009. For more information, please refer to Section 7
of this Circular.
Bonus deferral
period
3 years; 1/3 vested each year
Idem
Idem
Clawback
Not applicable
The deferred bonus may be clawed back by the
Bank:
Idem
− When an employee is found guilty of
dishonesty or unethical behaviour with
respect to his employment
− When an employee is found guilty of
misconduct and losses are incurred in that
fiscal year or subsequently
− When employee compensation is based on
the financial results of a business unit and
those results must be restated and reissued
Minimum share
ownership
requirements
Not applicable
Executives and certain specialists of the
Financial Markets sector must comply with the
requirements and maintain minimum holdings
of Common Shares of the Bank, including
vested (but unexpired) and non-vested RSUs,
vested and non-vested DSUs and vested (but
unexercised) options equal to twice the average
of their base salary for the previous three years.
Under the program, they have five years from
November 1, 2009 to meet these requirements.
Idem
Risk metric
A risk metric is currently used to trigger and
subsequently establish the percentage of the
envelope created for certain groups in the
Idem
Idem
During the year, the Bank’s Risk Management sector was integrated into the
review process of the annual bonus programs for Executives and specialists
of the Financial Markets sector. During fiscal 2010, this sector will develop a
risk metric framework for establishing the value of the bonus envelopes for
all groups in the Financial Markets sector effective November 1, 2010.
At the start of fiscal 2010, the HRC asked to have a trigger added to all
variable compensation programs so that no annual bonus envelope can be
created if the Bank does not meet the minimum regulatory capital required
by regulatory authorities.
30
Lastly, the HRC will receive, on an annual basis, a report from the Bank’s
Corporate Compliance Department that identifies any significant discrepancies
between the Bank’s compensation policies, programs and practices and the
regulations and standards in effect, as well as a report from the Bank’s Internal
Audit Department that identifies any significant differences between the
compensation paid and payable under the Bank’s total compensation policies
and programs.
SECTION 6
INFORMATION ON COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
An information document summarizing the Board’s approach to executive
compensation is also available on the Bank’s website (www.nbc.ca).
This compensation discussion and analysis explains in detail the philosophy
and underlying principles of executive compensation. It also explains why
the HRC recommended to the Board that each of the compensation elements
for fiscal 2009 be paid to the Named Executive Officers.
The information presented in the compensation discussion and analysis
of the Named Executive Officers is in accordance with the policies, programs
and decisions made by the HRC and ratified by the Board during the fiscal
year or preceding fiscal years. The HRC reviewed, approved and recommended
to the Board that it approve the content of this section.
In order to attract, engage and retain talented Executives who have
experience and recognized competencies, the Bank must offer total
compensation that compares with that offered by a certain number of companies
in the Canadian banking and financial services industry with which it must
compete to recruit qualified Executives from a limited pool.
The financial results for fiscal 2009 were excellent and among the best
ever achieved by the Bank, in particular:
––
––
––
––
Strategic Objectives of the Compensation Policy
and the Bank’s Financial Performance
The total compensation policy applicable to Executives, including the Named
Executive Officers, is founded on the following principles:
1.
OFFER competitive compensation in order to attract, motivate and
retain qualified Executives
2.
REWARD Executives for obtaining results that contribute to the
Bank’s financial success in the short, medium and long term
3.
PAY competitive compensation when results meet expectations,
higher compensation when they exceed set objectives, and lower
compensation when they fall short of expectations
4.
ENGAGE Executives to focus on enhancing the performance of the
Bank and the value of shareholders’ investment
5.
REQUIRE Executives to hold Common Shares of the Bank in order to
align their interests with those of the Bank’s shareholders
The total compensation policy for Executives seeks, among other things,
to promote the achievement of objectives for the sustained growth of
shareholder value. The compensation programs are therefore designed to
reward Executives for their specific contribution to the annual results achieved
and motivate them to maintain their performance over time and grow
shareholder value in the long term. It is therefore important for the Bank to
hire qualified Executives in order to reach these objectives.
Diluted earnings per share of $6.22, excluding specified items (for more
information, please refer to the Bank’s 2009 Annual Report), reached
a record high, demonstrating the strength of the Bank and the appeal
of its reputation despite the prevalent economic uncertainty throughout
the year;
Through prudent risk management, the quality of the credit portfolio
was sustained;
The capital base remained strong as did the liquidity position; and
Dividends were maintained and no Common Shares were issued to raise
capital, allowing existing holders of Common Shares to benefit fully
from strong financial results, without any dilution.
The following table presents the 2009 financial performance as well as
changes in the Bank’s financial results over the past three fiscal years.
Results
Financial
performance
2009
Financial
performance
2008
Financial
performance
2007
Available net income
$795 million
$744 million
$520 million
Return on equity
15.6%
16.4%
11.5%
Diluted earnings per
Common Share
$4.94 $4.67 $3.22
Tier 1 capital ratio in
accordance with Basel II
10.7%
9.4%
–(1)
Share price as at October 31 $56.39 $45.21 $54.65
TSR
32%
-13%
-7%
(1) Ratios calculated in accordance with the BIS Basel I rules in 2007
In 2009, available net income reached $795 million, up 6.7% from 2008.
TSR was 32% as against -13% the previous fiscal year. Earnings per share
advanced 5.8% to $4.94.
31
SECTION 6 INFORMATION ON COMPENSATION (cont.)
Leadership Development, Performance Management
and Succession Planning
In order to ensure that its One client, one bank approach is successfully
implemented, the Bank reviewed its leadership development, performance
management and career and succession planning processes. This integrated
process makes it possible to measure Executives’ leadership on an annual
basis. Executives prepare an action plan, which consists primarily of three
main dimensions:
––
––
––
annual objectives relative to their role and mandate;
annual objectives relative to their leadership development; and
annual objectives relative to the achievement of financial, strategic and
organizational performance indicators.
A development plan complements the action plan. Regular follow-up is
performed by the Bank’s management at meetings to review and discuss
each of these dimensions and ensure that Executives’ career development
and action plans are implemented.
Approval and Governance Process for Compensation
Policies and Programs
The HRC’s role is to review, approve and recommend to the Board that it
approve the different compensation elements by developing or applying
policies and programs, while ensuring compliance with governance
principles.
At the beginning of each fiscal year, the HRC therefore approves the
performance objectives of the President and Chief Executive Officer, reviews
the performance objectives set for the members of the Bank’s management,
and recommends that the Board approve the target objectives set for the
variable compensation programs.
The HRC also approves on an annual basis the mandates to be assigned
to independent external consultants for market studies on total
compensation.
During the year, their findings are first reviewed by the Bank’s
management.
During the annual review of the total target compensation of the members
of the Bank’s management, the HRC reads the results of the studies, receives
the recommendations of the President and Chief Executive Officer, and then
conducts its own review in order to issue its recommendations to the
Board.
At the end of the fiscal year, in order to determine the value of short-,
mid- and long-term variable compensation to be awarded, the HRC appraises
the performance of the President and Chief Executive Officer by comparing
his results against the objectives set at the start of the fiscal year. For the
other members of the Bank’s management, the HRC considers the appraisal
report from the President and Chief Executive Officer. Lastly, the HRC also
takes into account the results of applying the variable compensation
programs.
While the HRC is assisted in this process by the Bank’s management
and independent external consultants when needed, it has the authority to
approve the different aspects of the compensation and make recommendations
to the Board.
32
Benchmarking
On an annual basis, the HRC reviews the target total compensation of members
of the Bank’s management in relation to that offered by the companies in the
Bank’s peer group.
The peer group used to establish the value of compensation varies
according to the Bank’s business lines. For members of the Bank’s management,
the companies that form the peer group:
––
––
––
––
––
belong to the Canadian banking or financial services industry;
serve a comparable client group;
attract a similar profile of employees, professionals and experts;
have a large number of shareholders; and
contribute to the Hay Group’s database.
In 2009, the peer group for positions held by the Bank’s management
was made up of the following companies:
Canadian banks
Canadian insurance industry companies
Bank of Montreal
Canadian Imperial Bank of Commerce
Great-West Lifeco Inc.
Industrial Alliance Insurance
and Financial Services Inc.
Manulife Financial Corporation
Power Financial Corporation
Sun Life Financial Inc.
Royal Bank of Canada
The Bank of Nova Scotia
The Toronto-Dominion Bank
Each year, the Hay Group reviews and compares the compensation of
the Bank’s management with that paid in the peer group by adjusting the
peer group data to take into account the Bank’s relative size and the difference
between the level of responsibility associated with the Bank’s positions and
that of comparable peer group positions.
The Bank’s policy is to position the target total compensation of each
member of the Bank’s management in the peer group median, in accordance
with the Hay Group report. Target total compensation includes base salary,
target annual bonus and mid- and long-term variable compensation.
Components of Executive Compensation
Depending on their role and responsibilities, Executives’ total compensation
may consist of base salary, short-, mid- and long-term incentive bonuses,
pension plans, employee benefits, and perquisites.
Variable compensation programs are designed to ensure the alignment
of vision, strategies and decisions over time. The table below summarizes all
components of total compensation. A more detailed presentation of programs
is provided in “Description of Programs” in this section of the Circular.
Base Salary
Eligibility
All Executives
Objectives
Reward Executives’ level of responsibility, expertise, competency and relevant experience
Variable Compensation Programs
Deferred compensation
Short term
Medium term
Long term
Time horizon
1 year
3 years
10 years or longer
Type of program
Annual Bonus Program
PSU Plan
RSU Plan
Stock Option Plan
DSU Plan
Performance metric
Growth in TSR
Growth in the Bank’s share price
PSU:
Range
Threshold
Target
Maximum
80% of 2008 available net income
Target available net income
120% of 2008 available net income
75% of relative TSR
100% of relative TSR
125% of relative TSR
Eligibility
The Bank’s management and the majority of
Executives
PSU: The President and Chief Executive Officer
and certain members of the Bank’s management
RSU: Certain Executives
The Bank’s management and the majority of
Executives
Objectives
Provide all eligible employees with an incentive
to achieve a sustained and growing level of
earnings
Strengthen cooperation among all business
segments
Reward individual performance
Promote the achievement of objectives for
the sustained growth in value for holders of
Common Shares by tying a portion of the value
of Executive compensation to the future value of
the Common shares of the Bank
Promote the achievement of objectives for
the sustained growth in value for holders of
Common Shares by tying a portion of the value
of Executive compensation to the appreciation of
the value of the Common Shares of the Bank
N/A
RSU: N/A
Indirect compensation
Pension plans
Employee benefits
Perquisites
Eligibility
The majority of Executives
All Executives
The majority of Executives
Objectives
Encourage long-term retention of Executives by
rewarding their continued service at the Bank
and contributing to their post-retirement income.
Provide Executives and their families with
assistance and security so that they can focus
on their professional responsibilities and on
achieving the Bank’s objectives.
Offer Executives a limited number of benefits
to complement their total compensation. For
fiscal 2009, this includes a vehicle (or a car
allowance), a parking space and the services of
a financial consultant.
33
Percentage Weight of Target Total Direct Compensation
The mix of annual cash compensation (base salary and annual bonus) and mid- and long-term variable compensation is a function of the level of responsibility
of the member of the Bank’s management. The table below presents the target value of each component of total direct compensation for the Bank’s
management.
Base salary
Target annual variable compensation
Mid- and long-term target compensation
16%
20%
64%
Executive Vice-President, Financial Markets and Co-Chief Executive Officer, NBF
11%
29%
60%
Executive Vice-President, Personal and Commercial Banking
22%
23%
55%
Chief Financial Officer and Executive Vice-President, Finance, Risk and Treasury
22%
23%
55%
Executive Vice-President, Wealth Management and Co-Chief Executive Officer, NBF
16%
33%
51%
Other members of the Bank’s management
29%
20%
51%
Description of Programs
Base salary
Base salary makes up the fixed portion of total compensation. To determine
the salary of each member of the Bank’s management, the HRC considers the
member’s level of responsibility, expertise, competency and experience.
Moreover, the HRC considers the weighting of salary in relation to the value
of the total compensation of each member of the Bank’s management in order
to ensure an adequate ratio between the values of fixed and variable
compensation.
In order to ensure the competitiveness of the base salaries offered to
the Bank’s management, including the Named Executive Officers, the HRC
reviews, on an annual basis, the comparison of their salary with the median
salaries of the Bank’s peer group. The comparisons take into account the
relative size of the Bank and the differences in the responsibilities associated
with the positions at the Bank and those of comparable peer group
positions.
In order to tie the annual compensation of the majority of Executives
and employees to the Bank’s growth objectives and rally them around the
One client, one bank approach, significant changes were made to the annual
bonus program for fiscal 2009. The annual bonus program is based on the
following principles:
––
––
––
––
The main changes made to the program in 2009 were the following:
––
––
Short-Term Variable Compensation Programs
Annual Bonus Program
The Bank’s objective is to generate a sustained and growing level of financial
performance. The Bank is therefore of the opinion that sustained growth in
available net income will promote long-term growth in shareholder value. To
do so, the Bank put in place the One client, one bank approach in order to
improve its ability to continually satisfy clients’ needs and drive the company’s
growth.
promote cooperation among the business segments;
assess the Bank’s financial performance in absolute terms;
provide an incentive to outperform objectives; and
generate a minimum level of available net income before any bonuses
are paid.
––
annual bonus envelopes are calculated using the same indicator for all
members of the Bank’s management and the majority of Executives and
employees, i.e., available net income;
each year, the HRC approves the expected annual growth objective in
relation to available net income reported at the end of the previous
fiscal year. This growth objective makes it possible to set a target for
available net income. If the target is reached, an envelope comprising
the total value of target annual bonuses for the Bank’s management is
then created; and
each year, the HRC also approves the minimum level of available net
income that the Bank has to generate in order to create an annual bonus
envelope and the maximum level of available net income associated
with the maximum annual bonus envelope that can be created.
Summary
Eligibility
Performance metric
Award of bonuses
Form of bonuses
34
Bank’s management and the majority
of Executives and employees
Growth in available net income reported
Individual bonuses are determined in
relation to:
–– the extent to which individual
annual objectives are met and
results obtained
–– the assessment of leadership
behaviours and adherence to the
Bank’s values
–– the extent to which financial,
strategic and organizational
indicators are achieved
Bonuses are paid annually in cash
The HRC has reviewed stress tests in which different scenarios present
expected, exceptional and weak growth relative to available net income. The
HRC reviewed the consequences of these scenarios on the value of the resulting
annual bonus envelopes, and concluded that the changes to the bonus
program will make it possible to establish an appropriate relationship between
the expected growth objective for net income and the annual bonus
envelopes.
Application of the program for fiscal 2009
At the end of fiscal 2008, the Bank set its financial objectives for fiscal 2009
based on the economic outlook and market conditions at the time. Market
expectations in relation to growth in earnings per share were below 1%. For
fiscal 2009, the growth objective for available net income was set at 1% in
relation to the available net income reported in 2008 ($744 million), i.e.,
$752 million.
The annual bonus envelope is based on the extent to which the growth
objective for available net income is achieved, and calculated in a linear
manner within the following limits:
Financial objectives
Growth as a % of
available net income
(2009 vs. 2008)
in 2009 ($ millions)
% of 2009 envelope
created
2009
threshold
-20%
$595
0%
2008
results
0%
$744
95.27%
2009
target
1%
$752
100%
2009
actual
6.7%
$795
130.23%
Annual Bonus Program for Executives of the Financial Markets Sector
The Executives of the Financial Markets sector participate in a separate annual
bonus program. The purpose of this program is to reward group and individual
contributions to the results of this sector.
Summary
Eligibility
Performance metric
Award of bonuses
2009
maximum
20%
$893
200%
The Board has the authority, following a recommendation from the HRC,
to increase the bonuses, on an exceptional basis, by a percentage not
exceeding 15% of the value of the target bonuses (without however exceeding
the maximum of 200%), in order to take into account specific situations.
Moreover, the HRC approves and recommends to the Board the annual
bonuses to be awarded to each member of the Bank’s management, in light
of the achievement of their annual objectives and results, the assessment of
their leadership behaviours and their ability to adhere to and instill the
organization’s values, as well as their contribution to the achievement of
financial, strategic and organizational performance targets. For more information
on the performance indicators of the Named Executive Officers, please refer
to Section 7 of this Circular.
For information purposes, the majority of Bank employees are eligible
for the annual bonus program. The Bank, moreover, offers different programs
to specific groups of employees, through which it is able to reward group and
individual contributions to the results of the Bank and their business
segment.
Form of bonuses
Executives of the Financial Markets sector
Income before income taxes for the
Individual bonuses are determined in
relation to:
–– the extent to which annual
objectives and expected results
are achieved
–– the assessment of leadership
behaviours and adherence to the
Bank’s values
–– the extent to which financial,
strategic and organizational
indicators are achieved
Bonuses are paid annually as follows:
–– 60% in cash
–– 40% in RSUs
The bonus envelope is based on a predetermined percentage of the
income before income taxes of the Financial Markets sector. Bonuses are
calculated and paid annually, based on year-end results.
In keeping with good governance practices, 40% of the annual bonus
paid to each Executive is deferred in the form of RSUs. The value of these
units corresponds to the closing price of the Bank’s Common Shares on the
Toronto Stock Exchange on the day preceding the grant. Additional RSUs are
credited to the Executive’s account in an amount equal to the dividends paid
on the Common Shares. RSUs vest evenly over three years and expire at the
end of the third year. A cash payment will be equal to the number of vested
RSUs multiplied by the price corresponding to the average closing price of
the Bank’s Common Shares on the Toronto Stock Exchange for the 20 days
preceding the vesting date of the RSUs.
Annual Bonus Program for Specialists of the Financial Markets Sector
A variable compensation program is also offered to all the specialists of the
Financial Markets sector in order to reward them for their individual contribution
to the financial results of their various business units and of the sector as a
whole.
Summary
Eligibility
Performance metric
Award of bonuses
Form of bonuses
Specialists of the Financial Markets sector
Profitability of the business units in the
The envelopes are distributed as follows:
–– 70% within the business unit
–– 30% to all business units
Bonuses are paid as follows:
–– a cash portion
–– a deferred portion (established relative
to the bonus amount)
35
The formulas used to determine the bonus envelopes of the Financial
Markets specialists vary from one business unit to another in order to ensure
their competitiveness on the market. The envelope created for each business
unit is distributed as follows:
––
––
70% within the business unit based on individual contributions to the
capacity to generate income, business relationships with clients and
the degree of individual responsibility assumed; and
30% to all business units on a discretionary basis as recognition for
qualitative results that promote expected behaviours and organizational
values such as cooperation between business units.
In keeping with good governance practices, a portion of the annual
bonus for specialists is deferred in the form of RSUs. The following table sets
out the schedule in effect for fiscal 2009 and the schedule approved for
fiscal 2010.
Value of compensation
($ millions)
Value of
investment ($)
100
200
180
80
160
140
60
120
100
80
2009 Schedule
Portion of annual bonus
Up to $250,000
$250,000 – $400,000
$400,000 – $1,000,000
$1,000 000 and over
% deferred
0%
30% of the
portion
35% of the
portion
40% of the
portion
2010 Schedule
Portion of annual bonus
Up to $100,000
$100,000 – $400,000
$400,000 – $1,000,000
$1,000,000 and over
% deferred
0%
30% of the
portion
35% of the
portion
40% of the
portion
40
60
40
20
21.9
0
Oct. 04
Oct. 05
Oct. 06
Oct. 04
Relationship Between the Return on Bank Shares
and the Compensation of Named Executive Officers
The following performance graph shows the cumulative total return on
a $100 investment in Common Shares of the Bank on October 31, 2004,
compared to the total cumulative return of the S&P/TSX Banks Sub-index and
the S&P/TSX Composite Index for the past five fiscal years, assuming dividends
are fully reinvested at the market price on each dividend payment date.
The bar chart shows the total compensation paid to the Named Executive
Officers in position at the end of each fiscal year.
36
Total compensation of
the five Named Executive
Officers ($ millions)
n
n
n
Bank
S&P/TSX Composite
Index
S&P/TSX Banks
Sub-index
18.9
18.6
15.7
20
Oct. 05
12.4
12.8
Oct. 07
Oct. 08
Oct. 06
Oct. 07
Oct. 09
Oct. 08
0
Oct. 09
21.9
15.7
18.6
12.4
12.8
18.9
100.00
125.16
133.85
124.00
107.77
142.57
100.00
119.13
144.95
176.00
120.83
139.84
100.00
116.48
140.86
157.22
122.91
147.42
The above chart shows an increase in the cumulative total return on the
Bank’s shares between 2004 and 2006, with a decrease in fiscal 2007 and
fiscal 2008, followed by a steep climb in 2009.
The value of the compensation of the five Named Executive Officers in
position at the end of each year followed a similar curve except in 2005
and 2008. The pronounced decrease in the value of compensation between 2004
and 2005 resulted from changes in the Bank’s management, including the
retirement of Jean Turmel. In 2007, the compensation of the Named Executive
Officers was reduced by 33% owing to the ABCP impairment charge. Moreover,
during this same period, the total cumulative return of the Bank’s Common
Shares declined by 7%. In 2008, the level of total compensation was similar
to 2007. Although the Bank’s available net income recorded 43% growth
compared to 2007, the market did not yet reflect these results because of
the difficult economic environment that had set in toward the end of summer
2008. In 2009, the curves representing share return and compensation moved
in tandem.
Mid-Term Variable Compensation Programs
Performance Share Unit Plan
In 2009, the Bank introduced a PSU Plan for the Named Executive Officers.
The purpose of the PSU Plan is to tie a portion of executive compensation to
the future value of the Bank’s Common Shares.
Restricted Stock Unit Plan
The purpose of the RSU Plan is to tie a portion of the value of executive
compensation to the future value of the Bank’s Common Shares.
Summary
Eligibility
Performance metric
Vesting and term of grant
Valuation method
Eligibility
Performance metric
Valuation method
Named Executive Officers
Growth in the Bank’s TSR compared to the
growth in the S&P/TSX Banks Sub-index
(relative TSR)
3 years
The final value of PSUs is determined
according to the Bank’s share price, then
adjusted upward or downward depending
on relative TSR
Summary
The parameters of the PSU Plan are as follows:
––
––
––
––
A number of PSUs is granted annually based on the Bank’s share price
(on the day preceding the grant);
PSUs vest three years after the grant date;
Dividend equivalents are paid in the form of additional PSUs; and
At expiry, the payout value will first be based on the market price of the
Bank’s shares and then adjusted upward or downward depending on
the TSR obtained by the Bank compared to the TSR of the S&P/TSX
Banks Sub-index. This adjustment will be calculated as follows:
Annual compound growth of the Bank’s TSR over 3 years
Annual compound growth of the banks’ TSR over 3 years
= relative TSR
The adjustment to the payout value, based on the relative TSR result, will
be established in a linear manner within the following limits:
Relative TSR
Result
≥ 1.25
= 1.00
≤ 0.75
Adjustment range
(75% – 125%)
125%
100%
75%
When the result is within the established range, a linear calculation is
carried out. The payout may at no time exceed the maximum of 125% and
may not be below the threshold of 75%.
The HRC has reviewed stress tests presenting a number of possible
scenarios of the Bank’s performance and examined the consequences of
these scenarios on the value of PSUs. The HRC has evaluated the possible
values over three-year periods of expected, exceptional and weak performance.
The HRC concluded that granting PSUs makes it possible to establish an
appropriate relationship between this compensation element and total
shareholder return.
Certain Executives of the Bank
3 years
–– A predetermined percentage of the
Executive’s base salary is paid in
the form of RSUs
–– The number of RSUs granted
depends on:
• the dollar value of the grant
• the closing price of the Bank’s
Common Shares on the day
preceding the grant date
–– Dividend equivalents are paid in
the form of additional RSUs
–– A cash payment will be equal to the
number of vested RSUs multiplied
by the price corresponding to the
average closing price of the Bank’s
Common Shares on the Toronto
Stock Exchange for the 20 days
preceding the vesting date of the
units
In 2009, a portion of Ricardo Pascoe’s annual bonus was paid to him
in RSUs. No other member of the Bank’s management received RSUs.
Long-Term Variable Compensation Programs
Stock Option Plan of the Bank
The Bank’s Stock Option Plan has the following objectives:
––
––
Earn the loyalty of the Bank’s management and motivate them to
contribute to the Bank’s success; and
Encourage the Bank’s management to increase the value of the
investment of holders of Common Shares.
Summary
Eligibility
Performance metric
Term of grant
Vesting schedule
Valuation method
of Executives
10 years
Options vest over four years at the rate
of 25% per year
The number of options granted depends
on:
–– the dollar value of the grant
–– the Black-Scholes value
37
Each stock option entitles the holder to purchase one Common Share
at a price equal to the closing price of the Bank’s Common Shares on the
Toronto Stock Exchange on the day preceding the grant. Each year, when
granting options, the HRC takes into account the number and term of previously
granted options.
Options vest over four years at the rate of 25% per year. No options may
be exercised in the first year after they are granted. Executives may exercise
their vested options between the second business day following release of
the Bank’s interim or annual consolidated financial statements and the 30th
calendar day following that date.
Options may be exercised only by a plan member or his or her estate
and are not transferable. They may be exercised in whole or in part before
the expiration date set by the HRC at the time they are granted, but such
period cannot exceed 10 years. Options expire on their expiration date or
when employment at the Bank is terminated. For information on the treatment
of options depending on the reason for departure, please refer to the table
Conditions Applicable in the Event of Termination of Employment in Section 7
of this Circular.
In accordance with the special amendment procedure approved by the
holders of Common Shares on March 7, 2007, the Stock Option Plan stipulates
that certain material amendments to the Stock Option Plan require shareholder
approval, while certain minor changes can be approved by the Board without
shareholder approval. Subject to certain conditions, the Board may also
amend some features of the options already granted.
Over the past fiscal year, the Board approved changes regarding
retirement. Effective March 1, 2009, the options held by a Stock Option Plan
member who retires from the Bank continue to vest in accordance with the
terms and conditions in effect. He or she now has five years (instead of three)
to exercise his or her vested options.
Option Grant Process
The HRC grants options, on an annual basis, to eligible Executives and
other designated persons of the Bank and its subsidiaries. Since the Stock
Option Plan was adopted, the Bank has made only one grant per fiscal year,
on a specific date, without taking into account the Executives hired or appointed
during the fiscal year. This annual grant date has never been amended
retroactively.
Moreover, the Board has set specific conditions under which options
can be exercised. Accordingly, each member of the Bank’s management must,
upon exercising options granted since December 2002, keep the amount
equal to the gain resulting from the exercise of vested options, after tax
considerations, in the form of Common Shares of the Bank for one year.
Moreover, members of the Bank’s management must disclose their intention
to exercise any stock options of the Bank, regardless of the grant date, by
way of a news release, five business days prior to the intended exercise
date.
Options
granted in
December (1)
Value at
grant date(2)
($)
Total value
of grant
($)
The Stock Option Plan clearly stipulates that the price of options already
granted cannot be lowered, under any circumstances, to reflect changes in
the price of the Bank’s Common Shares. Executives can therefore only benefit
from the options granted to them provided the Bank’s share price increases
steadily over the long term.
The number of Common Shares reserved for a member may not exceed 5%
of the total number of Common Shares issued and outstanding. The Bank
strictly abides by this rule and no member holds options on a number of
reserved Common Shares that exceeds 5% of the total number of Common
Shares issued and outstanding.
Under the Bank’s long-term compensation programs, only the Stock
Option Plan allows for the issuance of the Bank’s equity securities. Pursuant
to Canadian securities legislation, the following table shows the situation of
the Stock Option Plan as at October 31, 2009.
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
or rights
(a)
Plan category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved by
security holders
Total
Weighted-average
exercise price
of outstanding
options, warrants
and rights
(b)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
7,798,096
$48.19
5,850,066
–
7,798,096
−
$48.19
−
5,850,066
The table below presents the total number of options granted in December
of each year and exercised in the past three fiscal years, as well as the reserve
for future grants at the end of each fiscal year.
Options exercised
during
the fiscal year
Options
outstanding at fiscal
year-end(3)
Options
available for future
grants at fiscal
year-end(1)
Total options
outstanding and
available for grant at
fiscal year-end
2009
1,863,160
13.41
24,984,976
906,457
7,798,096
5,850,066
13,648,162
2008
2,357,740
8.72
20,559,493
1,006,511
6,711,730
7,842,889
14,554,619
2007
2,260,036
10.18
23,007,166
931,318
5,770,347
9,790,783
15,561,130
(1) The number of options available for future grants at the end of fiscal 2009 represented 3.6% of the total number of Common Shares outstanding. Of this number, 1,863,160 options were granted
in December 2009, which represents 1.2% of the total number of Common Shares outstanding at fiscal year-end.
(2) The value of options was determined by using the Black-Scholes model (for compensation purposes) in 2009 and 2007 and 25% of the share price on the grant date for fiscal 2008.
(3) The number of options outstanding at the end of fiscal 2009 represented 4.8% of the total number of Common Shares outstanding.
38
Stock Appreciation Rights Plan of the Bank
The objective of the SAR Plan of the Bank is the same as that of the Stock
Option Plan and adheres to the same granting and vesting conditions.
Deferred Stock Unit Plan
Executives can elect to receive a portion of their stock options in the form of
DSUs. The purpose of the Plan is to tie a portion of executive compensation
to the future value of the Bank’s Common Shares.
Summary
Summary
Eligibility
Performance metric
Term of grant
Vesting schedule
Valuation method
Executives who are Canadian nonresidents
10 years
SARs vest over four years at the rate
of 25% per year
The number of SARs granted depends on:
–– the dollar value of the grant
–– the Black-Scholes value
Eligibility
Performance metric
Term of grant
Vesting schedule
Valuation method
The HRC grants SARs to Executives and other designated employees of
the Bank and its subsidiaries who are Canadian non-residents. For their part,
SAR beneficiaries can receive, on the exercise date, a cash amount equal to
the difference between the closing price of the Bank’s Common Shares on
the Toronto Stock Exchange the day before the exercise date and the closing
price the day before the grant date.
Like stock options, SARs may not be exercised before the vesting date
and have a maximum term of 10 years as of the grant date. Moreover, SARs
that have not been exercised shall be forfeited on the date they expire or the
date the beneficiary resigns or is dismissed for cause.
Only Canadian non-residents received SARs in fiscal 2009. No SARs have
been granted to Canadian members of the Bank’s management or Executives
since 1999. All unexercised SARs from the last award expired in December 2009
and were cancelled.
Bank’s management and the majority of
Executives
Period of active employment (DSUs cannot
be exercised as long as the holder is
employed)
DSUs vest over four years at the rate
of 25% per year
–– Executives of the Bank may elect to
receive up to 30% of their long-term
compensation in the form of DSUs
–– The number of DSUs granted
depends on:
• the dollar value of the grant
• the closing price of the Bank’s
Common Shares on the day
preceding the grant date
–– Dividend equivalents are paid in
the form of additional DSUs
–– A plan member may cash vested
DSUs by filing a notice of
redemption during a fixed period
after termination of employment
–– DSUs may be cashed only when an
Executive retires or leaves the Bank
Deferred Compensation Plan of NBF
NBF offers a deferred compensation plan to its key Individual Investor Services
employees. This deferred compensation plan was established to promote
growth in income and continuous improvement in profitability and foster
retention of key employees.
Summary
Eligibility
Performance metric
Employee contribution
Employer contribution
Form of bonuses
Executives and employees of NBF
Individual Investor Services
Financial results for this sector of activity
Voluntary – up to 15% of annual
compensation
–– The employer contribution is based
on NBF’s profitability
–– Individual bonuses are distributed
to certain employees with the
highest individual contributions
based on income generated
Bonuses are paid in the form
of deferred units
39
Employee contribution
Under the Plan, employees may elect to defer up to 15% of their annual
compensation until their retirement, as they do not participate in any pension
plan.
Employees may invest their contribution among six investment vehicles
and can modify the fund allocation among the six investments, once a year.
Bank shares are one of the investments proposed under the Plan.
Employer contribution
The Plan also permits employees to invest the employer contribution among
the same six proposed investments and modify the fund allocation among
the six investments once a year.
The amounts granted by the employer vest at the rate of 25% per year.
The value of the vested units is payable, under certain conditions, upon
termination of employment or on retirement.
No amendment was made to the Deferred Compensation Plan of NBF in
fiscal 2009.
Employee Benefit and Perquisite Programs
The Bank offers the Bank’s management and the majority of Executives the
same benefit programs as all its employees. The purpose of these plans is to
provide Executives and their families with assistance and security so that
they can focus on their professional responsibilities and on achieving the
Bank’s objectives. In addition, the Bank’s management and the majority of
Executives benefit from perquisites that are comparable to those offered by
the competition.
Summary
Eligibility
Plans offered
Employee Share Ownership Plan for Canadian Employees of the Bank
and its Designated Subsidiaries
For information purposes, the Bank has an ESOP that applies to all Canadian
employees of the Bank and its designated subsidiaries. The aim of the ESOP
is to build a stronger sense of belonging among Bank employees.
Summary
Eligibility
Performance metric
Valuation method
Valuation method
Members of the Bank’s management,
Executives and all Canadian employees
After the employee has completed one
year of continuous membership in the
ESOP. Subsequent contributions vest
immediately
–– Employees may contribute up
to 8% of their gross salary per year
–– Contributions are made by way of
payroll deductions
–– The Bank matches 25% of the
employee’s contribution, up to
$1,500 per year
No amendment was made to the ESOP in fiscal 2009.
40
of Executives
Employee benefits:
–– Medical and dental care
–– Life and accident insurance
–– Income protection in case of
disability
Perquisites:
–– Banking services at no charge or
at a reduced rate (offered to all
employees)
–– Use of a vehicle and a parking
space
–– Financial consultant fees
reimbursed
Employee benefit programs:
–– Basic coverage in accordance with
plan terms and conditions
–– Option to increase basic coverage,
if the Executive pays additional
premiums
–– Benefits taxable in accordance with
the prescribed legislation
Perquisites:
–– Set annual limit
–– Benefits taxable in accordance with
the prescribed legislation
Pension Plan and Post-Retirement Allowance Program
The Bank offers all eligible employees, including the Bank’s management, a defined benefit pension plan and a Post-Retirement Allowance Program (“PRAP”).
The purpose of these plans is to encourage long-term retention of Executives by recognizing their continued service at the Bank and by contributing to their
post-retirement income.
Summary
Eligibility
Definition of plans
Normal retirement age
(without pension reduction)
Years of credited service
Bank’s management
Contributory defined benefit pension plan subject to
regulations governing retirement plans under federal
jurisdiction
–– The PRAP aims to fully or partly offset the impact of the limits
prescribed under tax legislation with respect to pension
benefits provided by a registered plan
–– 60 years
––
––
––
––
Pension formula
––
––
Pensionable earnings
––
––
––
Member contributions
Reduction for early retirement
––
––
Idem
––
––
Idem
One year of credited service per year of membership
Certain members designated by the Board accumulate 1.5
years of credited service per year of membership between the
ages of 50 and 60 (or within 10 years of their appointment by
the Board)
No member may accumulate more than 35 years of credited
service
––
2% of the average pensionable earnings for each year of
credited service (up to a maximum of 35 years)
As of age 60, the pension is reduced to take into account the
benefits payable under the Canada or Quebec Pension Plan
Average earnings (base salary and annual bonus) for
the 60 highest-paid consecutive months
50% of the annual bonus is allowed (up to 35% of base salary)
Average annual pensionable earnings are capped at
$700,000, except for certain members designated by the
Board whose cap is $1,000,000
9% of pensionable earnings, up to $15,980 per year
The pension is reduced by the lesser of:
• 4% for each year prior to age 60; and
• 2 % for each year by which the sum of the age and years
of service falls short of 90
––
Two years of credited service for each year of membership
between August 1, 2006 and July 31, 2010, 1.25 years of
credited service for each year of membership between
August 1, 2010 and July 31, 2017 and one year of credited
service for each year of membership thereafter, up to 35
years of credited service
These conditions for crediting years of service were
approved taking into account all of Mr. Vachon’s years of
service at the Bank and its subsidiaries where no pension
plan was offered
Idem
––
––
Idem
The eligible annual bonus is limited to 100% of base salary
––
––
Idem
Idem
––
41
The benefits accrued under the defined benefit pension plan and the
PRAP form an integral part of the total compensation offered by the Bank. A
pension is payable under the registered pension plan up to the maximum
pension prescribed by current legislation, while the PRAP provides for any
supplemental pension.
Pensions are determined according to the years of credited service and
average pensionable earnings. In general, for each year of credited service,
these two plans combined grant a life pension equal to 2% of the average
pensionable earnings, reduced to take into account the benefits payable
under the Canada or Quebec Pension Plan.
The number of years of credited service for purposes of the PRAP is
limited to 35. The members of the Bank’s management will accrue 1.5 years
of service for each year of membership between the ages of 50 and 60 (or
within 10 years of their appointment by the Board). These amendments do
not apply to the President and Chief Executive Officer, whose pension
calculation provisions are described under “Pension Plan and Post-Retirement
Allowance Program” in this section of the Circular, and the Co-Presidents and
Co-Chief Executive Officers of NBF, for whom the industry peer group requires
different proportions of total compensation components.
Average pensionable earnings correspond to the average earnings for
the 60 highest-paid consecutive months. Pensionable earnings include the
base salary and the annual bonus, which is subject to limits that vary according
to line level:
––
––
––
for the President and Chief Executive Officer, the eligible bonus is
capped at 100% of base salary;
for the Bank’s management, except the President and Chief Executive
Officer, 50% of the annual bonus is recognized (up to 35% of base
salary). However, average annual pensionable earnings are capped at
$700,000, except for certain members designated by the Board whose
cap is $1,000,000; and
for all other Executives of the Bank, 50% of the annual bonus is
recognized (up to 25% of base salary). Average annual pensionable
earnings are capped at $400,000 for Senior Vice-Presidents and
$250,000 for Vice-Presidents.
Moreover, the Executives of the Bank contribute to the pension plan.
The contribution percentage also varies depending on the line level of the
Executive:
––
––
42
the President and Chief Executive Officer, the other members of the
Bank’s management and the Senior Vice-Presidents contribute 9% of
their pensionable earnings, up to $15,980 per year. At retirement, the
accumulated sum exceeding the basic contributions is converted into
a supplemental pension, subject to the limits imposed by applicable
legislation; and
the Vice-Presidents make basic contributions of approximately 3.4%
of their pensionable earnings, up to the Maximum Pensionable Earnings
(“MPE”) under the Canada or Quebec Pension Plan, plus 5% of their
salary in excess of the MPE. Annual basic contributions cannot exceed
$6,095.
Pursuant to the pension plans, the normal retirement age is 60. However,
these pension plans allow for early retirement starting at age 55, with the
Bank’s consent. In such a case, the pension is reduced by the lesser of:
––
––
4% for each year prior to age 60; and
2% for each year by which the sum of the age and years of service falls
short of 90.
The HRC ensures that the long-term interests of the Executives of the Bank
and its designated subsidiaries are closely tied to those of holders of Common
Shares. Share ownership requirements were therefore implemented in 2002
concerning the value of Common Shares of the Bank held by Executives of
the Bank and its designated subsidiaries, and are monitored by the HRC on
a regular basis to ensure compliance.
Summary
Positions covered
Minimum participation requirement
Period for meeting requirements
Valuation method
Bank’s management and the majority of
Executives
Multiple of previous three years’ average
base salary
Maximum of five years following
appointment
The minimum number of shares that must
be held is calculated by dividing the value
of the minimum holdings of Common
Shares of the Bank by the share price
The Bank’s management and the majority of Bank Executives are required
to maintain minimum holdings of Common Shares of the Bank, including
vested (but unexpired) and non-vested RSUs, vested (but unexpired) and
non-vested PSUs, vested and non-vested DSUs and vested (but unexercised)
options, commensurate with each Executive’s compensation and position.
The value of the minimum holdings of Common Shares equals the previous
three years’ average base salary received by a given Executive multiplied by
a factor established under the Bank’s share ownership requirements, as
follows:
Position
Bank’s management(1)
Senior Vice-Presidents
Vice-Presidents
(1) Excluding the President and Chief Executive Officer
Multiple of previous three
years’ average salary
5x
2x
1.5x
1x
Executives have five years from the date of their hiring or promotion to
meet these requirements. Moreover, all Executives are responsible for ensuring
that they comply with the share ownership requirements. If, for any reason,
a shortfall should occur, the Executive would then have to abstain from selling
his or her Bank shares and from exercising his or her vested options (unless
the shares are kept) until such time as the minimum requirements were once
again met.
Effective November 1, 2009, Financial Markets Executives and certain
specialists must comply with the requirements and maintain minimum holdings
of Common Shares of the Bank, including vested (but unexpired) and nonvested RSUs, vested and non-vested DSUs and vested (but unexercised)
options equal to twice their average base salary for the previous three years.
Under the program, they have five years from November 1, 2009 to meet
these requirements.
43
SECTION 7
INFORMATION ON THE COMPENSATION
OF THE NAMED EXECUTIVE OFFICERS
In December 2009, the HRC examined the results obtained for the Bank as a
whole relative to the targets set at the beginning of the fiscal year and approved
the variable compensation payable to the Named Executive Officers based
on the results obtained and each one’s individual contribution. It then
recommended that the Board approve it.
The tables below present, for each of the Named Executive Officers, a
summary of their career profile, objectives and results for 2009, target
compensation and the compensation paid for fiscal 2009, as recommended
by the HRC and approved by the Board. A description of the factors that led
to those decisions and an overview of the compensation paid to them over
the previous three fiscal years are also presented.
Louis Vachon
Career profile
President and
Chief Executive Officer
(since June 1, 2007)
Mr. Vachon has been President and Chief Executive Officer of the Bank since June 2007. He is responsible for the
strategies, orientations and development of National Bank Financial Group. From August 2006 to May 2007, he
held the position of Chief Operating Officer of the Bank responsible for all its operating units. He was Chairman
of the Board of Natcan Investment Management Inc. from November 2004 to September 2006. He also held the
position of President and Chief Executive Officer of National Bank Financial Inc.
Mr. Vachon has a Master’s in International Finance from The Fletcher School. He also has a Bachelor’s degree in
Economics from Bates College. In 2001, he was also named one of Canada’s Top 40 Under 40™.
––
2009 objectives
At the start of fiscal 2009, the Board approved performance objectives for
Mr. Vachon. The One client, one bank approach, the core of the Bank’s
strategy, is intended to give all current and future clients access to the best
advice and solutions that meet their financial needs and expectations. The
financial and non-financial objectives set for fiscal 2009 were directly linked
to implementing this approach. Mr. Vachon’s main objectives were to:
––
––
––
––
––
Increase revenues and shareholder return;
Align the distribution model with client needs;
Simplify internal processes in order to enhance performance;
Increase the efficiency of corporate functions; and
Instill a culture of cooperation, accountability and performance
at all levels.
2009 financial objectives
––
––
––
Growth in diluted earnings per share
Increase in revenues
Loan loss ratio
2009 target
2009 results
1.0%
1.9%
35-40 basis
points
6.0%
7.5%
32 basis
points
2009 non-financial results
––
44
At the start of fiscal 2009, the plan for deploying the new distribution
models in the segments where employees are in direct contact with clients
was finalized. Good planning sped up deployment of the new distribution
models, a decision that was taken in part to counter the effects of the
recession on general business development at the Bank. The new
distribution models were rolled out successfully. As a result, the objectives
of maximizing the use of the branches as the pivotal point of contact with
clients, and strengthening the management of client files and the advisory
sales culture were achieved.
––
––
In 2009, a new consolidated Operations group was formed following the
centralization of various operational functions within the Bank. A
procurement unit was created to reduce the cost of products and services.
Recurring annual savings of more than $100 million were generated from
all initiatives.
During fiscal 2009, the organizational structure and the roles of more than
4,000 employees throughout the Bank were reviewed. The roles of
managers and management employees in corporate positions were
completely revised. More than 500 employees at Finance, Human
Resources and Information Technology were centralized to improve
efficiency.
Over the past 12 months, great progress was made in view of building a
client-centric corporate culture that places considerable emphasis on
cooperation, rigour and accountability. Internal surveys revealed the
commitment of managers and employees to the One client, one bank
transformation.
2009 target total compensation
Given the events related to ABCP and the difficult economic situation from
2008 to 2009, Mr. Vachon’s target total compensation had not been adjusted
since he was appointed President and Chief Executive Officer on June 1,
2007.
The results of the 2009 Hay Group market study positioned Mr. Vachon’s
target total compensation below the median of target total compensation
for comparable peer group positions (adjusted to take the Bank’s particular
characteristics into account).
The HRC recommended to the Board that it approve raising Mr. Vachon’s base
salary from $800,000 to $850,000, representing an increase of 6.25% or
2.78% annually considering the 27-month period elapsed between June 1,
2007 and August 31, 2009. This adjustment came into effect on August 31,
2009. Despite this adjustment, Mr. Vachon’s compensation still falls
approximately 10% short of the peer group median.
section 7 INFORMATION ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS (cont.)
Mr. Vachon’s total compensation is composed of the following:
––
––
––
––
base salary of $850,000;
target annual bonus set at 125% of base salary. The bonus paid may vary
from 0% to 250% of base salary depending on the results of the Bank’s
annual bonus program;
target mid-term compensation, representing 150% of base salary at the
time of the grant, paid in the form of PSUs; and
target long-term compensation, representing 250% of base salary at the
time of the grant, paid in the form of options.
At the target, Mr. Vachon’s performance-related compensation represents
84% of his total compensation, with the deferred portion representing 64%
of his total compensation.
Moreover, the HRC determined that the Bank is, now more than ever before, an
institution deeply rooted in the communities it serves. The Bank successfully
assumed its role as a critical pillar of the economy by increasing lending to
consumers, small businesses and commercial clients during challenging
times. Staffing was increased to the highest level on record, and the donations
and sponsorships program was maintained to ensure continued support to
education, health, the arts and community outreach.
On the whole, in establishing Mr. Vachon’s 2009 variable compensation, the
HRC considered the Bank’s solid performance and its capacity to overcome
the recent financial and economic crisis.
The HRC therefore recommended to the Board that it approve the following
compensation:
––
Decisions on variable compensation paid in 2009
The HRC assessed Mr. Vachon’s performance for 2009 taking into account the
results associated with the Bank’s short-, medium- and long-term objectives,
risk management and the strategic, organizational and operational priorities
that are conducive to creating sustainable value for shareholders.
The HRC also took the following factors into consideration:
––
––
––
––
diluted earnings per share of $6.22 (for more information, please refer to
the Bank’s 2009 Annual Report), excluding specified items, were the
highest in the Bank’s history;
excellent quality of the credit portfolio;
a strong capital base and liquidity position; and
the maintenance of dividends and no issue of shares to raise capital.
Cash Compensation
Base salary
Annual bonus
Cash Total
Estimated Share-Based Compensation(1)
PSUs(2)
RSUs
Options(3)
Estimated Total Equity Value
Total Direct Compensation
Other Compensation(4)
Value of Retirement Plan(5)
Estimated Value of Total Compensation
––
––
an annual bonus of $1,400,000, representing 165% of base salary
considering that the results of the 2009 bonus program were 130.23%.
For more information, please refer to “Annual Bonus Program” in Section
6 of this Circular;
an award of $1,275,000 in PSUs; and
an award of $2,125,000 in stock options.
In 2009, Mr. Vachon’s total performance-related compensation represented
86% of his total direct compensation and his deferred total compensation
represented 61% of his total direct compensation.
2009
($)
2008
($)
2007
($)
806,453
1,400,000
2,206,453
800,000
743,900
1,543,900
675,074
–
675,074
1,275,000
–
2,125,000
3,400,000
5,606,453
185,607
356,000
6,148,060
–
1,200,000
2,000,000
3,200,000
4,743,900
175,057
241,000
5,159,957
–
1,200,000
2,000,000
3,200,000
3,875,074
126,835
1,163,000
5,164,909
(1) This compensation ties the interests of the Executive to the appreciation in value of the Common Shares of the Bank. The actual value of such share-based compensation will therefore be based on the
value of the Common Shares of the Bank when paid out or exercised.
(2) Medium-term variable compensation under the Bank’s PSU Plan. Mr. Vachon was awarded 21,798 PSUs. The value was established according to the price of the grant, namely, $58.49 in December 2009.
For more information, please refer to “Performance Share Unit Program” in Section 6 of this Circular.
(3) Mr. Vachon was awarded 158,464 options. The estimated value of options, calculated at 25% of the share price on the award date in 2008 and using the Black-Scholes model (for compensation purposes)
in 2009 and 2007, was $13.41 in December 2009, $8.72 in December 2008 and $10.18 in December 2007. The exercise price of these options is $58.49 for those granted in 2009, $34.87 for those
granted in 2008 and $53.85 for those granted in 2007.
(4) These amounts represent the dividends accumulated during the fiscal year and credited in the form of additional RSUs under the RSU Plan. The total value of other benefits for the fiscal year ended
October 31, 2009 did not exceed the lesser of: $50,000 or 10% of base salary and bonuses paid annually to the Named Executive Officers.
(5) Present value of the retirement benefit vested during the fiscal year and compensatory change during the fiscal year based on the assumptions used in the Bank’s Annual Report for each of those years.
The value of the retirement plan for fiscal 2007 and 2008 was calculated in accordance with the new provisions of Form 51-102F6 on the statement of the compensation of the Named Executive Officers.
For 2007, the value of the retirement plan takes into account the compensatory changes further to Mr. Vachon’s appointment as President and Chief Executive Officer on June 1, 2007.
45
Patricia Curadeau-Grou
Career profile
Ms. Curadeau-Grou has been Chief Financial Officer and Executive Vice-President – Finance, Risk and Treasury
since September 2008. From June 2007 to September 2008, she held the position of Executive Vice-President –
Finance, Risk and Treasury. Until May 2007, she was Senior Vice-President – Risk Management, a position she
had held since 1998. Ms. Curadeau-Grou joined the Bank in 1991. She was successively appointed Vice-President –
Credit, United States and International, and Vice-President – Special Loans, Real Estate and Syndication.
Chief Financial Officer and
(since September 15, 2008)
She has extensive banking experience, acquired during a career spanning 25 years.
Ms. Curadeau-Grou has a Bachelor’s degree in Finance and Marketing from McGill University. She has also
participated in several seminars at Harvard University. Since 2007, she has been a member of the Women’s
Executive Network Hall of Fame for Canada’s most powerful women. She received this honour after being named
one of Canada’s Most Powerful Women: Top 100 three times.
––
Loan loss ratio
––
Tier 1 capital ratio
2009 target
2009 results
35-40 basis
points
> 8.5%
32 basis
points
10.7%
2009 achievements
––
––
––
––
––
The quality of the Bank’s credit portfolio was among the best in the
Canadian banking industry. Overall, specific loan loss provisions in 2009,
excluding specified items, represented 0.32% of loans and average
acceptances, exceeding the 2009 target.
The Tier 1 capital ratio reached 10.7% as at October 31, 2009, exceeding
the 8.5% target.
Subject to the approval of the Superintendent, the Bank will calculate its
capital ratios using the Advanced Internal Ratings Based approach
beginning in the first quarter of 2010. Use of this approach will increase
the Tier 1 capital ratio by 125 to 150 basis points.
The Bank worked on implementing the project to transition to IFRS and
assess the impact of those standards on the consolidated financial
statements, i.e., beginning on November 1, 2011. The significant
differences between existing Canadian GAAP and current IFRS have already
been identified. The standards likely to have a material impact on the
Bank’s consolidated financial statements include, among others,
accounting standards and those for assessing financial instruments and
consolidation. As IFRS standards are continually changing, a dashboard
has been put in place to track changes.
The centralization of finance and accounting functions under the Corporate
sector contributed to improving the efficiency of corporate functions.
2008 to 2009, Ms. Curadeau-Grou’s target total compensation had not been
adjusted since she was appointed Executive Vice-President – Finance, Risk
and Treasury on June 1, 2007 despite her appointment as Chief Financial
Officer and Executive Vice-President – Finance, Risk and Treasury in
September 2008.
The HRC recommended to the Board that it approve increasing Ms. CuradeauGrou’s base salary and the target percentage of her short-term variable
compensation in order to maintain the competitiveness of her compensation
in relation to the peer group median:
––
the base salary was adjusted from $400,000 to $410,000, representing
an increase of 2.5% or 1.11% annually considering the 27-month period
elapsed between June 1, 2007 and August 31, 2009. This adjustment
came into effect on August 31, 2009; and
––
the target percentage of short-term variable compensation was increased
from 70% to 100% of base salary. This adjustment came into effect in
fiscal 2008-2009.
Ms. Curadeau-Grou’s target total compensation is composed of the following:
––
––
––
––
mid-term compensation, representing 70% of base salary at the time of
the grant, paid in the form of PSUs; and
At the target, Ms. Curadeau-Grou’s performance-related compensation
represents 78% of her total compensation, with the deferred portion
representing 55% of her total compensation.
46
The HRC assessed Ms. Curadeau-Grou’s performance for 2009 taking into
account the results associated with the Bank’s short-, medium- and longterm objectives in terms of the management of the Bank’s risk, treasury
and finances, as well as her contribution to strategic, organizational and
operational priorities.
Despite the difficult economic environment, the HRC recognized that the
exceptional quality of the credit portfolio had been maintained through
prudent risk management. The Bank’s capital base remained strong as did
its liquidity position, in spite of market volatility over the past year. The HRC
also took into consideration the important work accomplished by the Risk
Management sector in implementing the Advanced Internal Ratings Based
approach to measure risks.
Cash Compensation
Base salary
Annual bonus
Cash Total
PSUs(2)
RSUs
Options(3)
DSUs(4)
compensation:
––
––
––
––
an annual bonus of $534,000, representing 130% of base salary
6 of this Circular;
an award of $287,000 in PSUs;
an award of $534,415 in stock options; and
an award of $229,047 in DSUs.
In 2009, Ms. Curadeau-Grou’s total performance-related compensation
represented 80% of her total direct compensation and her deferred total
compensation represented 53% of her total direct compensation.
2009
($)
2008
($)
2007
($)
400,640
534,000
934,640
400,000
194,292
594,292
359,022
–
359,022
287,000
–
534,415
229,047
1,050,462
1,985,102
70,603
92,000
2,147,705
–
280,000
432,442
185,334
897,776
1,492,068
34,777
60,000
1,586,845
–
280,000
474,592
203,396
957,988
1,317,010
10,679
499,000
1,826,689
(1) This compensation ties the interests of the Executive to the appreciation in value of the Common Shares of the Bank. The actual value of such share-based compensation will therefore be based
on the value of the Common Shares of the Bank when paid out or exercised.
(2) Medium-term variable compensation under the Bank’s PSU Plan. Ms. Curadeau-Grou was awarded 4,907 PSUs. The value was established according to the price of the grant, namely, $58.49 in
December 2009. For more information, please refer to “Performance Share Unit Program” in Section 6 of this Circular.
(3) Ms. Curadeau-Grou was awarded 39,852 options. The estimated value of options, calculated at 25% of the share price on the award date in 2008 and using the Black-Scholes model (for
compensation purposes) in 2009 and 2007, was $13.41 in December 2009, $8.72 in December 2008 and $10.18 in December 2007. The exercise price of these options is $58.49 for those
granted in 2009, $34.87 for those granted in 2008 and $53.85 for those granted in 2007.
(4) Under the DSU Plan for the Executives of the Bank, Ms. Curadeau-Grou elected to receive 30% of her long-term compensation in the form of DSUs. Ms. Curadeau-Grou was awarded 3,916 DSUs.
The value of the DSUs was established according to the price of the grant, namely, $58.49 in December 2009, $34.87 in December 2008, and $53.85 in December 2007. For more information,
please refer to the table presenting the main components of the DSU Plan for the Executives of the Bank in Section 6 of this Circular.
(5) These amounts represent the dividends accumulated during the fiscal year and credited in the form of additional DSUs and RSUs under the DSU and RSU plans. The total value of other benefits
for the fiscal year ended October 31, 2009 did not exceed the lesser of: $50,000 or 10% of base salary and bonuses paid annually to the Named Executive Officers.
(6) Present value of the retirement benefit vested during the fiscal year and compensatory change during the fiscal year based on the assumptions used in the Bank’s Annual Report for each of those
years. The value of the retirement plan for fiscal 2007 and 2008 was calculated in accordance with the new provisions of Form 51-102F6 on the statement of the compensation of the Named
Executive Officers. For 2007, the value of the retirement plan takes into account the compensatory changes further to Ms. Curadeau-Grou’s appointment as Executive Vice-President – Risk,
Finance and Treasury on June 1, 2007.
47
Ricardo Pascoe
Career profile
Mr. Pascoe has been Co-President and Co-Chief Executive Officer of NBF since September 2006 and Executive
Vice-President – Financial Markets since September 2008. He joined the Bank in 2003 as Senior Vice-President –
Treasury and Financial Markets.
Financial Markets and
––
––
Mr. Pascoe held various strategic executive positions in London and New York at institutions specializing in capital
markets, derivatives and portfolio management.
He has a Master’s degree in Economics from Columbia University and an MBA from the University of Western
Ontario.
2009 target
2009 results
5%
29%
10%
71%
Increase revenues at Financial
Markets
Increase income before income taxes
at Financial Markets
As part of the implementation of the One client, one bank approach,
the Financial Markets and Wealth Management sectors were separated.
Mr. Pascoe’s total compensation was therefore revised to take into account
his new responsibilities.
Mr. Pascoe’s target total compensation is composed of the following:
2009 achievements
––
––
––
In Financial Markets, where all activities were reorganized along clientcentric lines, revenues and the number of clients grew appreciably. In
particular, the segment saw its client base increase by 57% for energy
derivatives, 48% for interest rate derivatives, and 30% for foreign exchange
derivatives.
Increased collaboration with Commercial Banking led to the growth in the
number of clients for commodity, foreign exchange and interest rate
derivatives.
Financial Markets worked closely with Wealth Management to develop
innovative structured products for retail investors.
––
––
––
––
target total annual bonus consisting of two elements:
• a target annual bonus set at 210% of base salary. The bonus paid
may vary from 0% to 420% of base salary depending on the results
of the Bank’s annual bonus program; and
• an annual bonus set at 0.40% of income before income taxes
generated by the Financial Markets sector, 80% of which is deferred
as RSUs;
At the target, Mr. Pascoe’s performance-related compensation represents
48
The HRC is of the opinion that these are the first concrete results of the One
client, one bank approach at work.
The HRC assessed Mr. Pascoe’s performance for 2009 taking into account
the results associated with the short-, medium- and long-term objectives
of the Bank and the Financial Markets sector, and the prudence with which
Mr. Pascoe directed the Financial Markets sector. The HRC also took into
consideration his contribution to the Bank’s strategic, organizational and
––
––
––
Despite the difficult economic environment, the HRC recognized the strong
growth of the sector’s income before income taxes and the number of clients
per product and service from other Bank sectors.
In 2009, Mr. Pascoe’s performance-related total compensation represented
92% of his total direct compensation and his deferred total compensation
Cash Compensation
Base salary
Annual bonus
Cash Total
Bonus paid as RSUs(2)
PSUs(3)
Options(4)
compensation:
a total annual bonus of $3,460,000, 36% of which was deferred as RSUs;
an award of $675,000 in PSUs; and
an award of $763,458 in stock options.
2009
($)
2008
($)
2007
($)
448,773
2,204,000
2,652,773
300,000
1,008,800
1,308,800
300,000
1,768,651
2,068,651
1,256,000
675,000
763,458
2,694,458
5,347,231
107,819
146,000
5,601,050
504,400
–
434,988
939,388
2,248,188
116,189
65,000
2,429,377
884,326
–
434,890
1,319,216
3,387,867
101,389
149,000
3,638,256
(2) Mr. Pascoe received 36% of his total annual bonus in the form of RSUs for Bank Executives at a price of $58.49 in December 2009, pursuant to the RSU Plan for Bank Executives. Mr. Pascoe was
thus awarded 21,474 RSUs. For more information on the RSU Plan, please refer to the section “Restricted Stock Unit Plan” in Section 6 of this Circular.
(3) Medium-term variable compensation under the Bank’s PSU Plan. Mr. Pascoe was thus awarded 11,540 PSUs. The value was established according to the price of the grant, namely, $58.49 in
(4) Mr. Pascoe was awarded 56,932 options. The estimated value of options, calculated at 25% of the share price on the award date in 2008 and using the Black-Scholes model (for compensation
purposes) in 2009 and 2007, was $13.41 in December 2009, $8.72 in December 2008 and $10.18 in December 2007. The exercise price of these options is $58.49 for those granted in 2009,
$34.87 for those granted in 2008 and $53.85 for those granted in 2007.
(5) These amounts represent the dividends accumulated during the fiscal year and credited in the form of additional RSUs under the RSU Plan. The total value of other benefits for the fiscal year
ended October 31, 2009 did not exceed the lesser of: $50,000 or 10% of base salary and bonuses paid annually to the Named Executive Officers.
Executive Officers.
49
Luc Paiement
Career profile
Mr. Paiement has been Co-President and Co-Chief Executive Officer of NBF since September 2006 and Executive
Vice-President – Wealth Management since September 2008. He was President – Individual Investor Services at
NBF from 2002 to 2006.
––
Increase revenues at Wealth
Management
Grow assets under management
Mr. Paiement has a Bachelor’s degree in Commerce from Concordia University and was recognized in 1999 in the
prestigious Top 40 Under 40™.
2009 target
––
During his career at NBF, which has spanned more than 25 years, Mr. Paiement has held various key positions in
the brokerage, institutional equities and corporate finance sectors.
2.3%
5.4%
2009 results
- 6.4%
9.2%
The Wealth Management sector was set up as part of the implementation of
the One client, one bank approach. Mr. Paiement’s total compensation was
therefore revised to take into account his new responsibilities.
Mr. Paiement’s target total compensation is composed of the following:
2009 achievements
––
––
––
––
––
––
50
A single unit was created to amalgamate some ten existing sectors at the
Bank and its subsidiaries in order to consolidate all Wealth Management
products and services and group the offering for high-net-worth clients
under a single sector.
A team comprised of specialists from all sectors of the Bank was created
to provide tailored financial solutions to high-net-worth clients (Private
Wealth 1859).
The product portfolio was enhanced through optimization of mutual fund
families and the introduction of new solutions.
The development and successful launch of the new marketing and sales
strategy was coordinated for the entire Wealth Management segment.
Wealth Management successfully integrated several recent acquisitions
made during the fiscal year.
During the year, business development teams were enhanced to enable
future penetration and revenue growth for investment and banking
products.
––
––
––
––
At the target, Mr. Paiement’s performance-related compensation represents
The HRC assessed Mr. Paiement’s performance for 2009 taking into account
the results associated with the short-, medium- and long-term objectives
of the Bank and the Wealth Management sector. The HRC also took into
Despite the difficult economic environment, the HRC recognized the growth of
assets under management, the successful launch of Private Wealth 1859, the
enhanced suite of solutions and financial products and the closer ties forged
with other Bank sectors and third parties for optimal distribution.
Cash Compensation
Base salary
Annual bonus
Cash Total
Bonus paid as RSUs
PSUs(2)
Options(3)
DSUs(4)
Other Non-Recurring Deferred Compensation(7)
compensation:
––
––
––
––
an annual bonus of $1,300,000, representing 274% of base salary
6 of this Circular;
In 2009, Mr. Paiement’s performance-related total compensation represented
85% of his total direct compensation and his total deferred compensation
2009
($)
2008
($)
2007
($)
473,714
1,300,000
1,773,714
300,000
1,008,800
1,308,800
300,000
1,768,651
2,068,651
–
712,500
534,415
229,047
1,475,962
3,249,676
90,335
110,000
3,450,011
504,400
–
304,502
130,484
939,386
2,248,186
89,992
74,000
2,412,178
884,326
–
304,423
130,467
1,319,216
3,387,867
82,119
65,000
3,534,986
–
5,852,385
–
(2) Medium-term variable compensation under the Bank’s PSU Plan. Mr. Paiement was awarded 12,182 PSUs. The value was established according to the price of the grant, namely, $58.49 in
(3) Mr. Paiement was awarded 39,852 options. The estimated value of options, calculated at 25% of the share price on the award date in 2008 and using the Black-Scholes model (for compensation
purposes) in 2009 and 2007, was $13.41 in December 2009, $8.72 in December 2008 and $10.18 in December 2007. The exercise price of these options is $58.49 for those granted in 2009,
$34.87 for those granted in 2008 and $53.85 for those granted in 2007.
(4) Under the DSU Plan for the Executives of the Bank, Mr. Paiement elected to receive 30% of his long-term compensation in the form of DSUs. Mr. Paiement was awarded 3,916 DSUs. The value of
the DSUs was established according to the price of the grant, namely, $58.49 in December 2009, $34.87 in December 2008, and $53.85 in December 2007. For more information, please refer
to the table presenting the main components of the DSU Plan for the Executives of the Bank in Section 6 of this Circular.
Executive Officers.
(7) Mr. Paiement received a conversion allowance in the form of deferred units under the deferred compensation plan of NBF in order to offset the reduction in his target total compensation.
51
Réjean Lévesque
Career profile
Réjean Lévesque has been Executive Vice-President – Personal and Commercial Banking since March 2008. From
May 2007 to February 2008, he was responsible for the Operations group. From 2005 to 2007, he assumed
responsibility for the Retail Financial Solutions team, including Electronic Payment Solutions. He was Senior
Vice-President – Commercial Banking, Northern and Eastern Quebec from 2002 to 2005 where he headed the
Operations Review Program.
Personal and Commercial
Banking
(since March 3, 2008)
Mr. Lévesque has more than 25 years of experience in the banking industry. He joined the Bank in 1988.
Mr. Lévesque has a Bachelor’s degree in Administration from McGill University with majors in finance and
international trade, and an MBA from the Université du Québec à Montréal as well as a Fellow’s diploma from the
Institute of Canadian Bankers.
––
––
––
Increase revenues at Personal and
Commercial Banking
Increase income before income taxes
at Personal and Commercial Banking Loan loss ratio
2009 target
2009 results
3.7%
2.2%
- 2.1%
43 basis
points
- 2.5%
41 basis
points
2009 achievements
2008 to 2009, Mr. Lévesque’s total target compensation had not been
adjusted since his appointment as Executive Vice-President – Personal and
Commercial Banking on March 3, 2008.
The HRC recommended to the Board that it approve increasing Mr. Lévesque’s
base salary and the target percentage of his short-term variable compensation
in order to maintain the competitiveness of his compensation in relation to
the peer group median:
––
––
––
––
––
––
––
––
––
––
52
Over 200 client-facing positions were created and staffed in the
branches.
New managers were appointed in a majority of branches to lead sales and
service.
Close to 875 personal banking advisors received training to serve small
businesses, 68 SME managers were appointed to high-potential branches
and five to the regions.
New tools were developed for client retention, proactive customer service
and relationship building.
Online loan granting and renewal was deployed across Quebec.
Over 40 specialist positions were created and staffed in financing
solutions, international trade and cash management.
Financial planners were integrated into Commercial Banking teams to
serve business clients’ personal needs.
A credit specialist role was created to give account managers more time
with their clients.
An exhaustive program to review and streamline business and service
processes end-to-end was launched.
––
the base salary was adjusted from $400,000 to $410,000, representing
an increase of 2.5% or 1.67% annually considering the 18-month period
elapsed between March 3, 2008 and August 31, 2009. This adjustment
came into effect on August 31, 2009; and
the target percentage of short-term variable compensation was increased
from 70% to 100% of base salary. This adjustment came into effect in
fiscal 2009.
Mr. Lévesque’s target total compensation is composed of the following:
––
––
––
––
target annual bonus set at 100% of base salary. The actual bonus may
vary between 0% and 200% of base salary depending on the results of
the Bank’s annual bonus program;
At the target, Mr. Lévesque’s performance-related compensation represents
The HRC assessed Mr. Lévesque’s performance for 2009 taking into account
the results associated with the short-, medium- and long-term objectives of
the Bank and the Personal and Commercial sector. The HRC also took into
The HRC recognized that the new distribution models in the client-facing
sectors were successfully deployed at both Personal and Commercial
Banking.
The objective of repositioning the branch network, which was the focal point
of the Bank’s strategy, was achieved. The most important accomplishments
included redefining the regions, revising business plans, designating a leader
in most branches in Quebec, training hundreds of advisors and managers,
and implementing new compensation and referral programs.
In addition, the HRC recognized efforts to develop a proactive sales culture
based on teamwork.
compensation:
––
––
––
––
an annual bonus of $534,000, representing 130% of base salary
6 of this Circular;
In 2009, Mr. Lévesque’s performance-related total compensation represented
80% of his total direct compensation and his total deferred compensation
To make better use of the branch network and increase the time devoted to
advisory sales, the structures for small businesses and SMEs were reworked.
More than 850 people are now working to meet the needs of small business
clients, new packages have been launched and new tools have been
implemented for managing sales opportunities.
Cash Compensation
Base salary
Annual bonus
Cash Total
PSUs(2)
RSUs
Options(3)
DSUs(4)
2009
($)
2008
($)
2007
($)
400,640
534,000
934,640
329,679
162,789
492,468
197,154
19,000
216,154
287,000
–
534,415
229,047
1,050,462
1,985,102
22,765
80,000
2,087,867
–
280,000
617,760
–
897,760
1,390,228
2,256
1,251,000
2,643,484
–
–
330,850
–
330,850
547,004
1,988
173,000
721,992
(2) Medium-term variable compensation under the Bank’s PSU Plan. Mr. Lévesque was awarded 4,907 PSUs. The value was established according to the price of the grant, namely, $58.49 in
(3) Mr. Lévesque was awarded 39,852 options. The estimated value of options, calculated at 25% of the share price in 2008 and using the Black-Scholes model (for compensation purposes) in 2009
and 2007, was $13.41 in December 2009, $8.72 in December 2008 and $10.18 in December 2007. The exercise price of these options is $58.49 for those granted in 2009, $34.87 for those
granted in 2008 and $53.85 for those granted in 2007.
(4) Under the DSU Plan for the Executives of the Bank, Mr. Lévesque elected to receive 30% of his long-term compensation in the form of DSUs. Mr. Lévesque was awarded 3,916 DSUs. The value of
the DSUs was established according to the price of the grant, namely, $58.49 in December 2009, $34.87 in December 2008, and $53.85 in December 2007. For more information, please refer
to the table presenting the main components of the DSU Plan for the Executives of the Bank in Section 6 of this Circular.
Executive Officers. For 2008, the value of the retirement plan takes into account the compensatory changes further to Mr. Lévesque’s appointment as Executive Vice-President – Personal and
Commercial Banking on March 3, 2008.
53
Summary of Compensation of Named Executive Officers
The following table is presented pursuant to Canadian securities legislation. It details the total compensation paid by the Bank and its subsidiaries to each
of the Named Executive Officers during the past three fiscal years.
Name and
principal position
Sharebased
awards
Year
Optionbased awards
Non-equity
incentive
compensation
plan
Annual
incentive
plans
Value of
retirement
plan
Other
compensation
Total
compensation
Salary
($)
(1) (2) (3) (4)
(5)
(6)
(7)
(8)
(9)
($)
($)
($)
($)
($)
($)
Louis Vachon
President and
Chief Executive Officer
2009
2008
2007
806,453
800,000
675,074
1,275,000
1,200,000
1,200,000
2,125,000
2,000,000
2,000,000
1,400,000
743,900
−
356,000
241,000
1,163,000
185,607
175,057
126,835
6,148,060
5,159,957
5,164,909
Chief Financial Officer and
Ricardo Pascoe
Financial Markets and
Co-President and
Co-Chief Executive Officer,
NBF
Luc Paiement
Co-President and
Co-Chief Executive Officer,
NBF
Réjean Lévesque
Personal and Commercial
Banking
2009
2008
2007
400,640
400,000
359,022
516,047
465,334
483,396
534,415
432,442
474,592
534,000
194,292
−
92,000
60,000
499,000
70,603
34,777
10,679
2,147,705
1,586,845
1,826,689
2009
2008
2007
448,773
300,000
300,000
1,931,000
504,400
884,326
763,458
434,988
434,890
2,204,000
1,008,800
1,768,651
146,000
65,000
149,000
107,819
116,189
101,389
5,601,050
2,429,377
3,638,256
2009
2008
2007
473,714
300,000
300,000
941,547
6,487,269
1,014,793
534,415
304,502
304,423
1,300,000
1,008,800
1,768,651
110,000
74,000
65,000
90,335
89,992
82,119
3,450,011
8,264,563
3,534,986
2009
2008
2007
400,640
329,679
197,154
516,047
280,000
−
534,415
617,760
330,850
534,000
162,789
19,000
80,000
1,251,000
173,000
22,765
2,256
1,988
2,087,867
2,643,484
721,992
(1) The Named Executive Officers are eligible for mid-term compensation equal to a percentage of their respective base salary: 150% for Mr. Vachon, 210% for Mr. Pascoe and Mr. Paiement, and 70%
for Ms. Curadeau-Grou and Mr. Lévesque. This compensation is paid in the form of PSUs. The number of PSUs awarded for fiscal 2009 was as follows: 21,798 for Mr. Vachon, 4,907 for Ms. CuradeauGrou, 11,540 for Mr. Pascoe, 12,182 for Mr. Paiement and 4,907 for Mr. Lévesque. The value was determined on the basis of the award price, namely, $58.49 in December 2009. These PSUs will
only be vested at the end of 2012 and their value will then be calculated according to the Plan. For more information, please refer to “Performance Share Unit Plan” in Section 6 of this Circular.
(2) Ms. Curadeau-Grou, Mr. Paiement and Mr. Lévesque each received 3,916 DSUs for Bank Executives at a price of $58.49 in December 2009, pursuant to the DSU Plan for Bank Executives. For more
information, please refer to “Deferred Stock Unit Plan” in Section 6 of this Circular.
(3) Mr. Pascoe received 36% of his total annual bonus in the form of RSUs for Bank Executives at a price of $58.49 in December 2009, pursuant to the RSU Plan for Bank Executives. Mr. Pascoe was
awarded 21,474 RSUs. For more information, please refer to “Restricted Stock Unit Plan” in Section 6 of this Circular.
(4) As at October 31, 2009, the number and value of RSUs and DSUs held by the Named Executive Officers, based on a share price of $56.39 as at October 30, 2009 (as October 31 was not a business
day, this is the closing price of the Bank’s Common Shares on the Toronto Stock Exchange on the previous business day), were as follows:
Total RSUs held as at
October 31, 2009
Number
Value ($)
Name
Louis Vachon
Ricardo Pascoe
Luc Paiement
Réjean Lévesque
54
66,487
14,077
38,577
22,777
8,379
3,749,187
793,777
2,175,335
1,284,419
472,472
Total DSUs held as at
October 31, 2009
Number
Value ($)
–
14,945
–
8,817
979
–
842,741
–
497,210
55,220
(5) The number of options awarded for fiscal 2009 was as follows: 158,464 for Mr. Vachon, 39,852 for Ms. Curadeau-Grou, 56,932 for Mr. Pascoe, 39,852 for Mr. Paiement and 39,852 for
Mr. Lévesque. The value was determined using the Black-Scholes model. The assumptions used to establish the value of the options for compensation purposes differs from those used in the
notes to the financial statements of the Bank as the value of the option is not amortized (for accounting purposes) over the term of the option. For 2009, 2008 and 2007, the estimated value of
the options on the grant date was $13.41, $8.72 and $10.18, respectively. The exercise price was $58.49 for options granted in 2009, $34.87 for options granted in 2008 and $53.85 for options
granted in 2007. For more information, please refer to “Stock Option Plan” in Section 6 of this Circular.
(6) The amounts in this column include the annual bonuses earned during each fiscal year ended October 31 and paid in cash.
Executive Officers. For more information, please refer to the table “Defined retirement benefits plan” in this section of the Circular.
(8) The amounts in this column represent dividends accumulated during the fiscal year and credited in the form of additional DSUs and RSUs under the DSU Plan and the RSU Plan for Executives. The
total value of other benefits for the fiscal year ended October 31, 2009 did not exceed the lesser of: $50,000 or 10% of base salary and bonuses paid annually to the Named Executive Officers.
(9) The value of total compensation for fiscal 2008 and 2007 was revised to take into account the revised value of the retirement plan, calculated pursuant to the new provisions of Form 51-102F6
on the statement of the compensation of the Named Executive Officers.
Share Ownership
As at October 31, 2009, all of the Named Executive Officers held the required value of Common Shares of the Bank, including DSUs, RSUs and options, in
compliance with the requirements in effect at that date. The table below presents the shareholdings of the Named Executive Officers at that date.
Share Ownership(1)
Requirement
Name and title
Louis Vachon
Chief Financial Officer and Executive Vice-President
Ricardo Pascoe
Executive Vice-President – Financial Markets and
Co-President and Co-Chief Executive Officer, NBF
Luc Paiement
Executive Vice-President – Wealth Management and
Co-President and Co-Chief Executive Officer, NBF
Réjean Lévesque
Executive Vice-President – Personal and Commercial Banking
Multiple of
previous three
years’ average
salary
Securities held,
value added of
vested options,
DSUs and
RSUs ($)
Value added
of non-vested
options ($)
5x
10,455,520
2x
Actual Multiple
Total value ($)
Based on
securities held,
value added of
vested options,
DSUs and RSUs
Based on the
total value
(including value
added of nonvested options)
5,310,091
15,765,611
12.8x
19.3x
3,431,644
1,156,031
4,587,675
8.5x
11.4x
2x
3,004,973
1,154,885
4,159,858
8.6x
11.9x
2x
3,680,183
808,446
4,488,629
10.3x
12.5x
2x
1,048,193
1,586,475
2,634,668
3.1x
7.7x
(1) Value determined on October 30, 2009 based on the closing price of the Bank’s Common Shares on the Toronto Stock Exchange, namely, $56.39 (as October 31, 2009 was not a business day,
this is the closing price of the Bank’s Common Shares on the Toronto Stock Exchange on the previous business day).
55
Share-Based and Option-Based Awards Outstanding
The following table indicates, for each Named Executive Officer, all awards outstanding at the end of the fiscal year ended on October 31, 2009. For more
information on the terms and conditions of the awards, please refer to Section 6 of this Circular.
Louis Vachon
Total
Total
Ricardo Pascoe
Total
Luc Paiement
Award date
Number of
securities
underlying
unexercised
options
(#)
Option
exercise price
($)
Option expiration date
December 7, 2000
December 13, 2001
December 12, 2002
December 11, 2003
December 9, 2004
30,000
28,300
37,000
28,000
55,000
24.90
28.01
30.95
41.00
48.20
December 7, 2010
December 13, 2011
December 12, 2012
December 11, 2013
December 9, 2014
944,700
803,154
941,280
430,920
450,450
−
−
−
−
−
−
−
−
−
−
December 7, 2005
December 13, 2006
December 12, 2007
December 10, 2008
37,400
125,400
196,464
229,360
766,924
45,000
35,000
24,900
32,400
46,620
49,592
233,512
30,000
16,000
13,400
30,300
61.44
65.90
53.85
34.87
December 7, 2015
December 13, 2016
December 12, 2017
December 10, 2018
41.00
48.20
61.44
65.90
53.85
34.87
December 11, 2013
December 9, 2014
December 7, 2015
December 13, 2016
December 12, 2017
December 10, 2018
41.00
48.20
61.44
65.90
December 11, 2013
December 9, 2014
December 7, 2015
December 13, 2016
−
−
499,019
4,935,827
9,005,350
692,550
286,650
−
−
118,415
1,067,220
2,164,835
461,700
131,040
−
−
42,720
49,884
182,304
19,300
14,600
16,000
53.85
34.87
December 12, 2017
December 10, 2018
30.95
41.00
48.20
December 12, 2012
December 11, 2013
December 9, 2014
108,509
1,073,504
1,774,752
490,992
224,694
131,040
−
2,052
24,421
35,909
62,382
−
−
326
−
8,803
13,924
23,053
−
−
−
8,518
14,965
−
15,094
38,577
−
−
−
−
115,733
1,377,107
2,024,882
3,517,722
−
−
18,396
−
496,386
785,177
1,299,960
−
−
−
480,356
843,853
−
851,125
2,175,335
−
−
−
16,000
21,200
61.44
65.90
December 7, 2015
December 13, 2016
−
−
29,904
34,920
151,924
3,400
15,300
16,000
7,700
13,000
32,500
70,844
158,744
53.85
34.87
December 12, 2017
December 10, 2018
30.95
41.00
48.20
61.44
65.90
53.85
34.87
December 12, 2012
December 11, 2013
December 9, 2014
December 7, 2015
December 13, 2016
December 12, 2017
December 10, 2018
75,956
751,478
1,674,161
86,496
235,467
131,040
−
−
82,550
1,524,563
2,060,116
−
3,824
6,980
−
18,998
29,802
−
−
−
245
−
−
8,379
8,623
−
215,662
393,576
−
1,071,308
1,680,546
−
−
−
13,805
−
−
472,472
486,277
December 11, 2003
December 9, 2004
December 7, 2005
December 13, 2006
December 12, 2007
December 10, 2008
December 11, 2003
December 9, 2004
December 7, 2005
December 13, 2006
May 30, 2007
December 12, 2007
December 10, 2008
December 12, 2002
December 11, 2003
December 9, 2004
December 7, 2005
December 13, 2006
May 30, 2007
December 12, 2007
December 10, 2008
Total
Réjean Lévesque
December 12, 2002
December 11, 2003
December 9, 2004
December 7, 2005
December 13, 2006
December 12, 2007
December 10, 2008
Total
Value of
Number of
unexercised
shares or units
in-the-money
of shares that
options(1) have not vested
($)
(#)
Market value
or payment of
share-based
awards that
have not vested(2)
($)
(1) The value of unexercised in-the-money options at the end of the fiscal year is established by calculating the difference between the closing price of the Common Shares of the Bank on the Toronto
Stock Exchange as at October 30, 2009, namely, $56.39 (as October 31, 2009 was not a business day, this is the closing price of the Bank’s Common Shares on the Toronto Stock Exchange on
the previous business day), and the exercise price of the options, multiplied by the number of unexercised options.
(2) The market value or payment of share-based awards that have not vested is calculated by multiplying the number of share units by the closing price of Common Shares of the Bank on the Toronto
Stock Exchange on October 30, 2009, namely, $56.39 (as October 31, 2009 was not a business day, this is the closing price of the Bank’s Common Shares on the Toronto Stock Exchange on the
previous business day).
56
Incentive Plan Awards – Value at Vesting or Value Earned During
the Fiscal Year
Retirement Plans for Named Executive Officers
The following table indicates the value of the awards at vesting or the value
earned during the fiscal year ended October 31, 2009. For more information
on the terms and conditions of the awards, please refer to Section 6 of this
Circular.
Name
Option-based
Share-based
awards – Value
awards – Value
vested during
vested during
the year(1)
the year (2)
($)
($)
Louis Vachon
Ricardo Pascoe
Luc Paiement
Réjean Lévesque
0
0
0
0
0
533,702
88,703
840,709
634,817
9,244
All the Named Executive Officers of the Bank participate in the defined benefit
pension plan and the Post-Retirement Allowance Program. The provisions of
these plans are described under “Pension Plan and Post-Retirement Allowance
Program” in Section 6 of this Circular.
The following table details, for each of the Named Executive Officers,
years of credited service as at October 31, 2009, annual benefits payable,
changes in the accrued pension benefit obligation between October 31, 2008
and October 31, 2009, including compensatory and non-compensatory
changes with respect to their membership in retirement plans for fiscal
2009.
It should be noted that the amounts in the table below are estimates
based on assumptions and employment conditions that can vary over time.
The method used to calculate these amounts may also differ from that used
by another company, which could call into question the relevance of a
comparison.
(1) The amount represents the theoretical total value if the options had been exercised on
the vesting date, established by calculating the difference between the closing price of
the Common Shares of the Bank on the Toronto Stock Exchange and the exercise price. On
the vesting date, the share price was $39.40, while the exercise price of options varied
between $48.20 and $65.90.
(2) The amount represents the value of the share units (RSUs, DSUs) on the vesting date, based
on the closing price of the Common Shares of the Bank on the Toronto Stock Exchange on
the vesting date.
Defined benefit pension plans(1)(2)
(5)(6)
Annual benefits payable
Name
Louis Vachon
Ricardo Pascoe
Luc Paiement
Réjean Lévesque
Years of
credited service(3)(4)
(#)
20.1
20.3
6.1
2.8
22.6
At fiscal
year-end
($)
At age 65
($)
340,000
173,000
45,000
24,000
133,000
591,000
289,000
159,000
150,000
203,000
Accrued
pension benefit
obligation at
start of
fiscal year (7)
($)
2,980,000
1,911,000
312,000
112,000
2,044,000
Compensatory
change(8)
($)
356,000
92,000
146,000
110,000
80,000
Noncompensatory
change(9)
($)
Accrued
obligation
at year-end(7)
($)
1,064,000
346,000
113,000
50,000
439,000
4,400,000
2,349,000
571,000
272,000
2,563,000
(1) The amounts in the “Salary” column of the table “Summary of Compensation of Named Executive Officers” in this section of the Circular and annual bonuses paid are used to calculate the
average pensionable earnings. To this end, the eligible bonus is limited to 100% of base salary for Mr. Vachon and 50% of the annual bonus is recognized for the other Named Executive Officers
(up to 35% of base salary). However, average pensionable earnings are subject to the caps set out in Note 2 to this table.
(2) Average maximum pensionable earnings are capped at $1,000,000 for Mr. Lévesque and Ms. Curadeau-Grou, and at $700,000 for Mr. Paiement and Mr. Pascoe.
(3) Mr. Vachon was credited an additional five years of credited service as at August 1, 2006, accruing two years of credited service per year from August 1, 2006 to July 31, 2010, 1.25 years of
credited service per year from August 1, 2010 to July 31, 2017, and one year of credited service per year thereafter, up to no more than 35 years of credited service.
(4) The years of credited service for Mr. Lévesque and Ms. Curadeau-Grou are calculated according to the provisions of the Post-Retirement Allowance Program for eligible members of the Bank’s
management, namely, 1.5 years of credited service for each year between ages 50 and 60.
(5) The estimated pensions do not take into account the pension generated by the additional contributions accumulated by the Named Executive Officer.
(6) The pension is payable for life, but reduced to take into account the benefits payable under the Canada or Quebec Pension Plan. Upon the member’s death, 60% of the pension is payable to the
member’s spouse. If there is no spouse, part of the pension is payable to the dependent children.
(7) The accrued obligation represents the present value of the pension benefit for years of credited service up to October 31, 2008 or October 31, 2009. These values were calculated using the same
assumptions as those used for the Bank’s consolidated financial statements, in particular, a discount rate of 7.25% as at October 31, 2008 and of 6.75% as at October 31, 2009. The value of
benefits payable by the Executive’s contributions is included in the calculation of the accrued obligation.
(8) The compensatory change includes the annual cost of retirement benefits and the impact of changes in base salary, the increase in maximum pensionable earnings following appointments, plan
amendments or allocations of years of credited service.
(9) The non-compensatory change reflects the amounts attributable to interest accruing on the obligation at the beginning of the fiscal year, contributions paid by the Executive, actuarial gains and
losses other than those associated with compensation levels, and changes in actuarial assumptions. The most significant of these changes for fiscal 2009 relates to the decrease in the discount
rate from 7.25% to 6.75%.
57
Employment Contract
Termination of Employment Policy in the Event of a Change of Control
The Bank entered into an employment contract with Luc Paiement on October
29, 2008, which stipulates that in the event that he is dismissed without
cause or he resigns, all deferred units granted to him as at October 31, 2008
as a conversion allowance will vest on the termination date. All the deferred
units would then be paid according to the terms and conditions of the Plan.
For more information, please refer to “Deferred Compensation Plan of NBF”
in Section 6 of this Circular.
At fiscal year-end, no other termination of employment agreement with
any Named Executive Officer had been concluded or was in effect.
Under the Bank’s Termination of Employment Policy, the President and Chief
Executive Officer and the other members of the Bank’s management would
receive severance in the event their employment were to be terminated by
the Bank following a change of control. The compensatory measures are
applicable when the following two events occur:
––
––
a change of control of the Bank, as defined below; and
a dismissal (without cause) resulting from a Bank initiative during the
two-year period following the change of control, or the resignation of
an Executive further to a significant reduction in compensation or
responsibilities or a transfer to another organization, against his or her
wishes, during the two-year period following the change of control.
Moreover, this policy specifies that, in the case of voluntary resignation,
dismissal for cause, demotion or termination of employment based on an
unsatisfactory performance, the policy is not applicable.
“Change of control” means any change in the ownership of Bank shares
following the acquisition of shares, a merger or a business combination
resulting in one incorporated or unincorporated entity beneficially owning in
excess of 50% of the voting shares of the Bank.
Pursuant to this policy, the Bank’s management would be entitled to
severance equal to their base salary and their average annual bonus for the
previous three years (or the target annual bonus for the Bank’s management
in their respective positions for less than three years) for a period of 24
months, up to the normal retirement age.
No amendments were made to the Termination of Employment Policy
in fiscal 2009.
58
Conditions Applicable in the Event of Termination of Employment
The table below summarizes the conditions applicable to the Named Executive Officers in the event of termination owing to a change of control, voluntary
resignation, dismissal for cause, dismissal without cause or retirement.
Event
Metric
Voluntary resignation
––
––
––
––
––
––
Base salary and employee benefits programs cease to apply
No annual bonus is paid
Vested PSUs and RSUs are paid out and non-vested PSUs and RSUs are cancelled
Vested unexercised options and non-vested options are cancelled
Vested DSUs are paid out and non-vested DSUs are cancelled
Pension benefit paid at its actuarial value or as a deferred benefit
Dismissal for cause
––
––
––
––
––
––
Base salary and employee benefits programs cease to apply
No annual bonus is paid
Vested PSUs and RSUs are paid out and non-vested PSUs and RSUs are cancelled
Vested unexercised options and non-vested options are cancelled
Dismissal without cause
––
Severance equal to three weeks of salary per year of service for up to 18 months plus an amount equal to the average annual
bonus for the previous three years
Non-vested PSUs and RSUs vest immediately and are paid out at the Bank’s average share price during the previous 20 days
A period is determined during which non-vested options continue to vest. Vested unexercised options and non-vested options
are cancelled at the end of the period
––
––
––
––
Change of control
and termination of
employment
––
Retirement
––
––
––
––
––
––
––
––
––
––
––
Severance equal to base salary and average annual bonus for the previous three years is paid for a period of 24 months, up to
the normal retirement age
Non-vested PSUs and RSUs vest immediately and are paid out at the Bank’s average share price during the previous 20 days
Non-vested options vest immediately and Executives have a maximum of 12 months to exercise their options
DSUs vest immediately and Executives have 12 months to redeem their DSUs
The period covered by the severance is recognized as eligible service under the pension plan, provided that severance is paid
in instalments
Base salary ceases to apply
Retiree benefits apply (on the same basis as other Bank employees)
Annual bonus is prorated to the number of months worked
PSUs and RSUs continue to vest in accordance with the same timeframe had retirement not been taken and are paid out when
vested
Since March 1, 2009, non-vested options continue to vest in accordance with the same timeframe had retirement not been
taken and Executives have a five-year period to exercise their options
DSUs vest immediately and Executives have a maximum of 23 months to redeem their DSUs
The pension benefit is paid monthly
59
Estimated Value of Conditions Applicable in the Event of Termination of Employment
The table below indicates the estimated additional amounts that would have been paid to the Named Executive Officers had their employment terminated
on October 31, 2009.
Estimated additional value(1)
($)
Name
Reason for termination
Louis Vachon
Retirement
Dismissal for cause
Dismissal without cause(2)
Change of control and termination
of employment(3)
Retirement
Dismissal for cause
of employment(3)
Retirement
Dismissal for cause
of employment(3)
Retirement
Dismissal for cause
of employment(3)
Retirement
Dismissal for cause
0
0
0
1,962,022
of employment(3)
634,578
Ricardo Pascoe
Luc Paiement
Réjean Lévesque
4,881,907
0
0
0
615,121
1,124,636
0
0
0
1,012,268
5,494,872
0
0
0
4,297,493
5,511,499
0
0
0
830,175
(1) The estimated additional value refers to severance that would have been paid. No additional value from the retirement plan would have been payable regardless of the reason for termination.
(2) If a Named Executive Officer had had his or her employment terminated on October 31, 2009 further to dismissal without cause, he or she would have been entitled to accelerated vesting of any
share-based compensation already granted in the fiscal years prior to 2009. For additional information on outstanding share-based and option-based awards, please refer to this section of the
Circular. Based on the Bank’s share price on that date, the value of such accelerated vesting would have been $3,517,722 for Mr. Vachon and $2,175,335 for Mr. Pascoe. For Ms. Curadeau-Grou,
Mr. Paiement and Mr. Lévesque, the value would have been less than that indicated in this section of the Circular, as they elected to receive a portion of their long-term compensation in the form
of DSUs instead of options. The adjusted value would therefore have been $793,797 for Ms. Curadeau-Grou, $1,284,419 for Mr. Paiement and $472,472 for Mr. Lévesque.
(3) If a Named Executive Officer had had his or her employment terminated on October 31, 2009 further to a change of control, he or she would have been entitled to accelerated vesting of any
share-based or option-based compensation already granted in the fiscal years prior to 2009. For additional information on share ownership and outstanding share-based and option-based
awards, please refer to this section of the Circular. Based on the Bank’s share price on that date, the value of such accelerated vesting would have been $8,827,813 for Mr. Vachon, $2,455,990
for Ms. Curadeau-Grou, $3,330,220 for Mr. Pascoe, $2,488,992 for Mr. Paiement and $2,072,753 for Mr. Lévesque.
Disclosure to Shareholders on the Board’s Approach to Executive Compensation
The holders of Common Shares of the Bank can send their questions or comments concerning the Board’s approach to executive compensation via e-mail to:
[email protected] or via regular mail to:
Board of Directors
National Bank Tower
600 De La Gauchetière West, 4th Floor
Montreal, Quebec Canada H3B 4L2
60
SECTION 8
OTHER INFORMATION
Indebtedness of directors, executive officers and employees
Aggregate Indebtedness
As at January 15, 2010, aggregate indebtedness outstanding to the Bank or any of its subsidiaries, other than loans repaid in full and routine indebtedness
as defined by Canadian securities legislation, of current and former directors, executive officers(1) as well as former directors, executive officers and employees
of the Bank and its subsidiaries stood as follows:
Purpose
Securities purchases
Other
To the Bank or
its subsidiaries ($)
To another
entity ($)(A)
2,058,833
–
12,082,730
–
(A) Loans granted by another entity which are the subject of a guarantee, a letter of credit
provided by the Bank or one of its subsidiaries, a support agreement or other similar
arrangement or understanding
Indebtedness of Directors and Executive Officers Under Securities Purchase and Other Programs
The following table presents the indebtedness(2), during the Bank’s fiscal year ended October 31, 2009, of each individual who is, or was during the most
recently completed fiscal year, a director or executive officer of the Bank, of each director nominee of the Bank, and of each related person of any such director,
executive officer or nominee. These loans exclude loans repaid in full and routine indebtedness.
Name and principal position
Involvement of Bank
or subsidiary
Largest amount
outstanding during
fiscal year ended
October 31, 2009 ($)
Amount outstanding as
at January 15, 2010 ($)
Financially assisted
securities purchased
during fiscal year ended
Security for
October 31, 2009 indebtedness
Amount forgiven
during fiscal
year ended
October 31, 2009 ($)
Securities purchase programs
–
– –
– – – –
Bank/ Lender
247,884(3)
151,122(3) – – –
Other Programs
Luc Paiement
(1) For the purposes of this section and in accordance with subsection 1.1(1) of the CSA’s Regulation 51-102, the executive officers are the Chairman of the Board, the President and Chief Executive
Officer, the Vice-Presidents in charge of a principal business unit, division or function of the Bank, and officers of the Bank or its subsidiaries who perform a policy-making function in respect of
the Bank.
(2) These loans are granted by the Bank or one of its subsidiaries or by another entity if the indebtedness is the subject of a guarantee or a letter of credit provided by the Bank or one of its
subsidiaries, a support agreement or other similar arrangement or understanding.
(3) This amount represents one or more personal leveraged loans (“Leveraged Loans”) granted to finance the participant’s equity commitments under the EdgeStone Affiliate Fund co-investment
program. All Leveraged Loans bear interest at the federal prescribed rate published quarterly and are secured by a pledge of the participant’s interests in each limited partnership comprising
the EdgeStone Affiliate Fund co-investment program. This program provided officers and eligible employees of the Bank and some of its subsidiaries the opportunity to co-invest with EdgeStone
Capital Equity Fund II-A, L.P., EdgeStone Capital Equity Fund II-B, L.P., EdgeStone Capital Mezzanine Fund II, L.P., EdgeStone Capital Venture Fund, L.P. and EdgeStone Capital Venture Fund II,
L.P. (collectively, the “Main Funds”) and the Bank or a company in which the Bank holds an indirect interest. Officers and eligible employees are offered credit facilities by the Bank or one of its
subsidiaries (the “Lender”) through limited recourse Leveraged Loans. The Leveraged Loans bear interest and will mature on the earliest of: (i) the 10th anniversary date of the establishment of
the applicable Main Fund, (ii) the dissolution of the applicable EdgeStone Affiliate Fund limited partnership, (iii) the sale or disposal of the applicable EdgeStone Affiliate Fund limited partnership
interest held by a participant, or (iv) the date the principal amount of the Leveraged Loans otherwise becomes due and payable. The Lender will have personal recourse against the participant
equal to 50% of the participant’s total commitment (equity and leveraged portion). The Lender’s recourse for the balance of the Leveraged Loans is limited to the participant’s EdgeStone Affiliate
Fund limited partnership interest and the distributions thereon.
61
section 8 OTHER INFORMATION (cont.)
Directors’ and officers’ liability insurance
Additional information
The Bank has purchased a liability insurance policy for the directors and
officers of the Bank and its subsidiaries. This policy covers directors and
officers under circumstances where the Bank is not able to or not permitted
to indemnify them. The policy provides aggregate coverage of up to
$100,000,000, with no deductible.
The annual premium for this insurance is $617,855. The policy expires
on August 31, 2010 and is renewable.
Additional information about the Bank may be obtained from its website
(www.nbc.ca) and from the SEDAR website (www.sedar.com).
Financial information about the Bank can be found in the comparative
consolidated financial statements and Management’s Discussion and Analysis
for the most recently completed fiscal year, included in the Annual Report.
The Bank will, upon request, promptly provide any shareholder, free of
charge, with a copy of the Annual Report, a copy of the Annual Information
Form together with a copy of any document incorporated therein by reference,
a copy of the Consolidated Financial Statements for the fiscal year ended
October 31, 2009 with the accompanying auditors’ report, a copy of any
subsequent interim report and a copy of the Management Proxy Circular of
the Bank with respect to its most recent Annual Meeting of the Holders of
Common Shares of the Bank involving the election of directors. To obtain
copies of these documents, please send your request to the Corporate
Secretary’s Office of the Bank at 600 De La Gauchetière West, 4th Floor,
Montreal, Quebec, Canada H3B 4L2.
Share repurchase program
On January 31, 2009, the NCIB in place at the Bank since February 1, 2008
ended. The Bank did not repurchase any of its common shares under this
NCIB.
On January 28, 2010, the Board of Directors of the Bank announced the
implementation of an NCIB, beginning on February 1, 2010 and ending no
later than January 31, 2011, under which it could repurchase for subsequent
cancellation, through the Toronto Stock Exchange, a maximum of 3,222,932
Common Shares representing approximately 2% of its outstanding Common
Shares. The price paid by the Bank for any Common Shares it purchases will
be the market price of the Common Shares on the Toronto Stock Exchange on
the purchase date.
In the opinion of the Board, the repurchase of Common Shares under
this NCIB represents an appropriate use of the Bank’s surplus funds.
As at February 12, 2010, the Bank had not repurchased any Common
Shares under the terms of this NCIB.
Shareholders may obtain, free of charge, a copy of the notice of intent
regarding this NCIB of the Bank, which was approved by the Toronto Stock
Exchange, by writing to the Corporate Secretary’s Office of the Bank at 600
De La Gauchetière West, 4th Floor, Montreal, Quebec, Canada H3B 4L2.
Minutes
A copy of the minutes of the Annual Meeting of the Holders of Common Shares
of the Bank held on February 27, 2009 was mailed to the holders of Common
Shares, together with this Circular. The minutes may also be found on the
SEDAR website (www.sedar.com).
CONTACTING THE BOARD OF DIRECTORS
The Board considers it important to allow Bank shareholders and clients as
well as other stakeholders to comment on subjects concerning the Bank,
particularly the Board’s approach to executive compensation. Bank
shareholders and clients and other stakeholders may contact the Board, a
Board committee, the Chairman of the Board or a director, including an
independent director, by e-mail at: [email protected] or by mail c/o
the Corporate Secretary’s Office of the Bank at 600 De La Gauchetière West,
4th Floor, Montreal, Quebec, Canada H3B 4L2.
Approval of the board of directors
The Board has approved the content of this Circular and its mailing to the
holders of Common Shares.
(signed) Linda Caty
Vice-President and Corporate Secretary
February 12, 2010
62
SCHEDULE A
SHAREHOLDER PROPOSALS
Shareholder Proposals
The Bank has reproduced below the proposals and submissions by one
shareholder in their original form without making any changes whatsoever.
The Mouvement d’Éducation et de Défense des Actionnaires (MÉDAC),
82 Sherbrooke Street West, Montreal, Quebec, Canada H2X 1X3, submitted
Proposals Nos. 1 and 2 to the Bank.
Proposal No. 1
Shareholder proposal and statement (translation):
“It is proposed that the board of directors offer shareholders a larger slate
of director nominees than the number of positions to be filled on the board
of directors.
Rationale
One of the fundamental rights of shareholders is the right to elect directors.
However, shareholders do not currently have a choice of nominees; they can
only vote for a candidate or abstain from voting. Since organizations always
present the same number of nominees as the number of seats to be filled,
the electoral process for directors currently consists in ratifying, or not, the
appointment of directors selected by management. Under this type of
nominating process, directors feel more accountable toward one another
than to the shareholders they must represent. Such an electoral system overly
isolates and protects directors from the will of shareholders.
The 2008-2009 financial crisis severely shook shareholder confidence
in the members of boards of directors. Many shareholders questioned the
effectiveness of their board of directors, the quality of the skills brought to
the boardroom table and the board’s ability to adequately represent their
interests. Such concerns about the effectiveness of boards of directors
prompted the Securities and Exchange Commission (SEC) to launch a
consultation in June 2009 (“Facilitating Shareholder Director Nominations”)
on proposed changes to the rules for nominating and electing directors in
order for shareholders to play a more active role in the director electoral
process.
After reviewing management proxy circulars from the past 10 years, we
concluded that:
––
––
––
Position of the Bank:
The Board regularly reviews the selection criteria for directors. It also regularly
evaluates the contribution of each of its members to ensure it is comprised
of directors who have the knowledge, competencies and expertise needed
to effectively contribute to the Bank’s management, the conduct of its business
and the orientation of its development. After carrying out this analysis, it
recommends the most suitable director nominees for election or
re-election.
If the number of director positions to be filled were less than the number
of proposed nominees, potential candidates might hesitate before standing
for election, as a defeat could have a direct negative impact on their
opportunities to stand for election to other boards of directors as well as their
reputation. The measure proposed by the shareholder would therefore reduce
the Bank’s ability to recruit and retain top calibre candidates.
The Bank has implemented measures in order to allow shareholders to
exert greater influence over the election of directors. First, the Bank has
adopted a majority voting policy under which nominees are deemed not to
have received the support of shareholders even if they are elected, if the
number of abstentions exceeds the number of votes cast in their favour.
Moreover, instead of voting for a slate of nominees, shareholders have the
possibility of voting for them separately. Finally, it is important to remember
that, since 1998, directors cannot serve on the Bank’s Board for more than 15
annual terms.
For these reasons, the Board and management of the Bank recommend
voting AGAINST this proposal.
the boards of directors change relatively little;
they poorly represent the mix of shareholders: individual shareholders,
women, different generations, etc.;
they do not adequately reflect shareholders’ expectations and
concerns.
Shareholders must be given the opportunity each year to either re-elect
the incumbents or replace them. Accordingly, the board of directors should
offer shareholders a true choice by nominating more candidates than the
number of seats to be filled. For each nominee, the management proxy circular
should present, in addition to the information required under regulations, the
specific contribution each nominee is expected to make to the board of
directors. Management should refrain from favouring one nominee over another,
assuming the nomination process was carried out diligently and
professionally.”
63
SCHEDULE a Shareholder proposals (cont.)
Proposal No. 2
Shareholder proposal and statement (translation):
“It is proposed that the Annual Report and Management Proxy Circular report
the equity ratio between the total compensation of the Chief Executive Officer,
the total compensation of the five named executive officers and the average
total compensation of employees.
Rationale
This year, MÉDAC is submitting a proposal that is almost identical to the one
it submitted in 2008 concerning disclosure of the internal pay equity ratio.
This second submission is prompted by the recent turbulence on financial
markets and the sharp decline in investor confidence. These events magnified
the perverse effects of an overly generous, or even excessive, executive pay
policy. According to data compiled by the Washington-based Economic Policy
Institute, in 2005, the average CEO in the United States earned 262 times the
pay of the average worker. Moreover, a CEO earned more in one workday
(there are 260 in a year) than an average worker earned in 52 weeks. Recent
data indicate that nothing has changed.
The ever-widening gap between the pay of officers and their employees
is of concern to many individual shareholders. When it comes to the companies
they invest in, they are worried about the impact of such imbalances on the
engagement and productivity of employees. At the same time, the perception
of inequity can take its toll on personnel by being demotivating as well as
causing resentment and a negative attitude. These potential effects of excessive
executive pay can have a direct, negative impact on their interests as
investors.
From a social standpoint, by paying astronomical salaries to a select
group of a few thousand officers, companies are creating a class of millionaire
technocrats who are disconnected from the reality of small investors and
ordinary people.
Faced with public indignation about the obscene salaries of some,
governments in many countries are threatening to take legislative action to
limit the compensation of the officers of publicly traded companies. In the
United States, for instance, the Securities and Exchange Commission (SEC)
recently held consultations on management proxy circulars and possible ways
of improving them. It asked the question: “Are investors interested in disclosure
of whether the amounts of executive compensation reflect any considerations
of internal pay equity?”
MÉDAC firmly believes that disclosure of the internal pay equity ratio is
of great interest to shareholders as it would enable them to make informed
analyses of the results of the company’s compensation policy and exercise
their voting rights and right to speak at annual meetings with a comprehensive
view of the situation.”
64
Position of the Bank:
The Bank places a great deal of importance on its human resources management
practices. It seeks, among other things, to offer its officers compensation that
is competitive with its peer group while taking into account its primary objective
of increasing the value of shareholders’ investment by ensuring sustained
financial performance. The Board has therefore implemented total compensation
policies and programs designed to foster both the recruitment and retention
of qualified officers and the achievement of the Bank’s financial objectives.
The short-, mid- and long-term compensation of the Bank’s officers
varies according to the results of the Bank and its various business units or
to total shareholder return. It also takes into account the individual performance
of each executive. Accordingly, the compensation of each executive is
competitive when results meet expectations, higher when they exceed set
objectives and lower when results fall below expectations. Currently, when
results meet expectations, the variable compensation of the President and
Chief Executive Officer and other members of the Office of the President
represents between 71% and 89% of their total direct compensation.
The Board implements and reviews the compensation programs on an
annual basis and establishes the compensation of Bank officers based on
comparative data for the peer group provided by independent external
consultants, thus ensuring that the policies and programs in place are
competitive and tied to the interests of shareholders and the Bank’s long-term
prosperity.
Lastly, the Bank and the Board provide full and transparent disclosure
about executive compensation programs and the compensation paid to
Named Executive Officers in this Circular. This information is, in the Board’s
opinion, more detailed and a more relevant indicator than the proposed ratio,
allowing shareholders to effectively compare the Bank’s compensation
practices to those of other companies in its peer group.
For these reasons, the Board and management of the Bank recommend
voting AGAINST this proposal.
SCHEDULE B
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
1. Introduction
The Board of Directors (the “Board”) of National Bank of Canada (the “Bank”)
believes that sound corporate governance is an essential component of the
Bank’s operations and that it benefits all of its stakeholders: clients, employees
and shareholders. Consequently, the Board makes corporate governance a
top priority.
The Bank’s corporate governance framework consists of clearly defined
structures, policies and procedures. The first of these structures is the Board,
which is supported by three standing committees: the Audit and Risk
Management Committee (the “ARMC”), the Conduct Review and Corporate
Governance Committee (the “CRCGC”) and the Human Resources Committee
(the “HRC”).
The Board’s corporate governance policies and procedures enable it to
achieve its objective of sound corporate governance and comply with the
requirements of authorities that regulate the Bank, including the Superintendent
of Financial Institutions (Canada), the Canadian Securities Administrators
(the “CSA”) and the Toronto Stock Exchange.
The mandates of the Board, the ARMC, the CRCGC and the HRC are
available on the Bank’s website.
2.Board of Directors
2.1. Framework
The Board exercises its role and responsibilities in accordance with applicable
legislation, including securities legislation, the Bank’s by-laws, internal
policies and procedures, as well as the Charter of Expectations for its
directors.
It prepares and approves its own mandate as well as that of its Chairman,
and regularly assesses and reviews these mandates to ensure they comply
with the legislation in force and adequately reflect the duties and responsibilities
of the Board and its Chairman. Any changes to these mandates are submitted
to the Board for approval and the changes to the mandate of the Chairman
of the Board are approved in his or her absence.
2.2.Role and responsibilities
The main duty of the Board is to oversee the management of the Bank,
safeguard its assets, and ensure its viability, profitability and development.
The Board communicates its orientations to management through the President
and Chief Executive Officer of the Bank, who ensures implementation.
The Bank’s management is responsible for the day-to-day management
of the Bank’s operations, pursuant to the powers delegated by the Board and
in accordance with the laws and regulations applicable to the Bank.
a) Strategic planning
The Board periodically reviews and approves a strategic plan in which the
Bank establishes its mission, vision, business objectives and strategy, taking
into account business opportunities and risks for the Bank. It also reviews
and approves the business plans relating to the Bank’s main operations and
reviews them regularly to ensure they remain appropriate and prudent given
the Bank’s economic and business environment, its resources and its
results.
The Board is assisted in these duties by the Bank’s President and Chief
Executive Officer and management.
b)Integrity and ethics
The Board promotes integrity and ethical behaviour within the Bank, specifically
with regard to the duty to act with honesty and integrity, abide by the law,
treat others with respect, keep information in the strictest confidence, avoid
conflicts of interest and respect the Bank.
It ensures that the rules of conduct and ethics are maintained, in particular
by adopting a Code of Professional Conduct for directors, officers and employees
of the Bank and its subsidiaries (the “Code of Conduct”), and ensures that
the Bank has an ongoing, appropriate and effective process to guarantee
compliance with these rules. Moreover, the Board ensures that any material
breach of the rules of ethics and professional conduct by a director or senior
officer is disclosed in accordance with continuous disclosure obligations. It
also ensures that the Code of Conduct is filed with the CSA and available on
the Bank’s website.
c) Compliance with legislation and governance
The Board ensures that the Bank’s operations comply with applicable legislation
and regulations and reviews the processes that ensure compliance.
With the support of the ARMC, the Board adopts policies with regard to
compliance and regulatory risk and keeps apprised of important changes to
laws and regulations applicable to the Bank. It requires that management set
up a compliance program to ensure that the Bank complies with its
obligations.
The Board periodically reviews and approves, with the assistance of the
CRCGC, the Bank’s corporate governance practices. It keeps apprised of trends
and best practices in order to take them into account when establishing,
implementing and overseeing the Bank’s corporate governance policies and
practices.
d)Risk management
Together with the ARMC, the Board reviews and approves the overall risk
philosophy and risk tolerance of the Bank, recognizes and understands the
major risks to which the Bank is exposed and ensures that appropriate systems
are set up for effective management of those risks.
The ARMC receives detailed quarterly reports from the Bank’s Risk
Management sector covering the sector’s activities, the general allowance
for credit risk, impaired loans and loan losses, and compliance with regulatory
capital ratios and obligations under the Basel Accords. On the recommendation
of the ARMC, the Board annually discusses and approves all major policies
concerning the Bank’s business-related risks and ensures that such policies
are enforced. The ARMC receives reports from and has regular discussions in
private with the internal auditor and the external auditors of the Bank.
e) Management oversight
The Board fulfills its duty regarding the oversight of the Bank’s business
operations by reviewing reports periodically provided by those responsible
for the various business lines, and discussing with the senior officers of these
business lines.
f) Management succession planning and development
The Board approves the appointment of officers of the Bank and ensures that
they are qualified and competent. It oversees the succession planning process
for management positions, including, in particular, that of President and Chief
Executive Officer.
The Board, with the assistance of the CRCGC and the HRC, ensures that
the President and Chief Executive Officer and other members of management
are highly principled and that they foster a culture of integrity throughout the
institution.
65
SCHEDULE B STATEMENT OF CORPORATE GOVERNANCE PRACTICES (cont.)
g)Communication and disclosure of financial information
The Board promotes transparency and diligence in disclosing information to
the Bank’s shareholders, investors and clients and to the general public. It
ensures that the information presented to shareholders is reliable and provided
in a timely manner and prohibits selective disclosure of information. It regularly
reviews the Bank’s Information Disclosure Policy, which describes, in particular,
the type of information to be disclosed, whether financial or non-financial,
and when and in what manner such information may be disclosed.
The Bank has created an Annual and Quarterly Information Disclosure
Committee to ensure the implementation and smooth operation of disclosure
controls and procedures and financial reporting internal control procedures,
as well as a Timely Disclosure Committee to ensure the implementation and
smooth operation of procedures for the disclosure of timely material information.
These committees review the Bank’s Information Disclosure Policy on a regular
basis and make recommendations for its approval to the ARMC, the CRCGC
and the Board.
h)Executive compensation
The HRC assists the Board in the exercise of its duties relating to human
resources. In addition, the HRC ensures that the compensation policies and
programs implemented are conducive to achieving the Bank’s objectives,
without however compromising its viability, solvency or reputation.
The Bank’s total compensation policies and programs are based on the
following principles:
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offer competitive compensation in order to attract, motivate and retain
qualified officers;
reward officers for obtaining results that contribute to the Bank’s financial
success in the short, medium and long term;
pay competitive compensation when results meet expectations, higher
compensation when results exceed set objectives, and lower
compensation when they fall short of expectations;
engage officers to focus on enhancing the Bank’s performance and the
value of shareholders’ investment; and
require officers to hold Common Shares of the Bank, in order to align
their interests with those of the Bank’s shareholders.
i) Share ownership requirements
To ensure that the compensation of Bank officers is closely tied to shareholders’
interests, the HRC has implemented share ownership requirements.
Under these rules, officers of the Bank and its designated subsidiaries
are required to maintain minimum holdings of Common Shares of the Bank,
including vested (but unexpired) and non-vested Performance Share Units
(“PSUs”), vested (but unexpired) and non-vested Restricted Stock Units
(“RSUs”), vested and non-vested Deferred Stock Units (“DSUs”), vested (but
unexercised) Stock Appreciation Rights of the Bank (“SARs”) and vested (but
unexercised) options, commensurate with each officer’s compensation and
position. The value of the minimum holdings of Common Shares equals the
previous three years’ average base salary received by a given officer multiplied
by a factor established under the requirements.
Bank officers have five years from the date of their hiring or promotion
to meet these requirements. Moreover, all officers are responsible for ensuring
that they comply with the share ownership requirements. If, for any reason,
a shortfall should occur, the officer would then have to abstain from selling
his or her Bank shares and from exercising his or her vested options and
vested SARs (unless the share certificates are kept) until such time as the
minimum requirements were once again met.
The HRC regularly monitors share ownership to ensure that these
requirements are respected.
66
2.3.External advisors and access to management
The Board and each of its committees may hire, when they deem it appropriate,
legal counsel or other independent advisors to carry out their duties and their
responsibilities. They may also set their remuneration. Moreover, the ARMC
and the HRC annually approve the list of mandates that the Bank plans on
entrusting to these external advisors to ensure that these mandates do not
compromise their independence.
3. Committees Created by the Board
The Board may delegate some of its powers to committees that it sets up in
accordance with applicable legislation and its needs. Committee members
and Chairs are appointed from among the directors and must meet the
eligibility requirements of all applicable legislation as well as the independence
standards of the CSA. The Bank discloses the list of the members of each
committee in its annual Management Proxy Circular.
The committee members meet in camera at each of their regular committee
meetings without the Bank’s officers, who are invited to committee meetings
from time to time. They regularly report to the Board on their activities.
Together with the CRCGC, the Board develops and approves the mandates
of each Board committee as well as those of the committee Chairs. The Board
committees regularly review their respective mandates and that of their Chair
and recommend them for approval to the Board, to ensure that they adequately
reflect how they function, as well as their activities and responsibilities, and
those of their Chair, while complying with the legislation in force.
4.Selection of Director Nominees, Election, oversight
and Compensation
4.1. Size and composition of the Board
The Board is composed of 12 to 18 directors, in accordance with applicable
legislation and By-Law I – General By-Law of the Bank (“By-Law I”). The Board,
together with the CRCGC, periodically reviews its size and composition to
verify its effectiveness, within the limits set out in applicable legislation and
By-Law I.
Directors must meet all the eligibility criteria set out in the Bank Act
(Canada), any other legislation applicable to the Bank, and any internal rules
established by the Board. A majority of the directors are Canadian residents.
Moreover, a maximum of two thirds of the directors may be affiliated with the
Bank in accordance with the Bank Act.
a) Competence
The Board is composed of directors who possess extensive complementary
knowledge and competencies, as well as relevant expertise enabling them
to make an active, informed and profitable contribution to the management
of the Bank, the conduct of its business and the orientation of its
development.
The Board’s expectations with regard to its members, both in terms of
their individual experience and their contribution to the Board, are specified
in the Charter of Expectations, which is prepared by the CRCGC and approved
by the Board. The Charter notably sets out the aptitudes sought when
nominating a new director for election or when nominating an existing director
for re-election, as applicable. It promotes balance in terms of the knowledge
and competencies of directors to ensure that the Board can fulfill its role in
all respects.
Director nominees must demonstrate several aptitudes, including
sufficient financial knowledge given the scope and complexity of the Bank’s
business, and solid business judgment. Moreover, director nominees must
distinguish themselves through their ability to make objective and informed
decisions, their impartial judgment, and their capacity to assume positions
of responsibility on Board committees.
b)Independence
A majority of the members of the Board and all the members of the Board’s
committees are independent, as defined by the CSA. The Board, either directly
or through one of its committees, adopts structures and procedures to ensure
the Board functions independently of management.
The members of the Board and of the committees who are independent
meet without the Bank’s officers being present at each regular Board meeting.
Moreover, the Board ensures that the roles of Chairman of the Board and
President and Chief Executive Officer are separate.
The CRCGC regularly assesses the independence of the members of the
Board in accordance with CSA criteria using, among other things, information
provided semi-annually by directors or otherwise reported to the CRCGC. The
Board then reviews the CRCGC’s assessment of independence.
c) Integrity of directors
The directors of the Bank act with integrity and exercise impartial judgment
in performing their duties and fulfilling their responsibilities. In that regard,
directors are bound by the provisions of the Code of Conduct and other rules
of ethics applicable to directors and employees of the Bank, and annually
undertake in writing to comply with the Code of Conduct.
Director nominees must have a reputation for acting with integrity and
honesty, be recognized as persons who fulfill their fiduciary duties towards
the companies for which they serve or served as director. They must have
respected all the important aspects of the rules of conduct for directors and
officers of said company. The CRCGC conducts a background check on all
director nominees in accordance with the guidelines issued by the
Superintendent of Financial Institutions (Canada) and the directors annually
confirm in writing that they do not have a criminal record.
d)Conflicts of interest
Directors must avoid all real, potential or apparent conflict of interest situations
with the Bank. Therefore, a director with an interest in a contract or a material
transaction with the Bank must disclose the nature and scope of his or her
interest to the Chairman of the Board or the Chair of the CRCGC, in accordance
with applicable legislation. He or she must abstain from participating in
deliberations or leave the meeting of the Board during the review of the
contract or transaction and must abstain from voting on the matter, barring
exceptions provided for by applicable legislation. Directors annually undertake
in writing to comply with the Bank’s standards with regard to conflicts of
interest.
e) Availability and outside directorships
Board and committee members are required to attend at least 75% of all
meetings to which they are convened, unless the CRCGC deems that factors
beyond their control prevented them from doing so. Directors are to prepare
adequately for the meetings in order to be able to actively participate in
discussions during the meetings of the Board and the committees on which
they serve.
Directors must inform the Chair of the CRCGC or the Chairman of the
Board before accepting an invitation to serve on another board. Together with
the Chairman of the Board, the Chair of the CRCGC assesses whether the
director would be involved in a real, apparent or potential conflict of interest
and whether the director would remain fully capable of performing his or her
duties as a director of the Bank.
The Board believes that the fact that a director of the Bank serves on
the board of directors of another reporting issuer does not necessarily adversely
affect his or her ability to exercise his or her independent judgment and to
act in the best interest of the Bank. The Board does not limit the number of
boards on which directors may serve, but it regularly reviews this information
to verify each director’s ability to properly fulfill his or her role.
The Bank maintains a list of all the directorships of its directors and its
director nominees. In its Management Proxy Circular, the Bank discloses the
names of the reporting issuers as well as public and parapublic corporations
on whose boards the director nominees currently serve or have served in the
past five years.
f) Change in status
Directors must inform the Chairman of the Board or the Chair of the CRCGC
as soon as possible of any change in their professional or personal status
that could have an impact on their role as directors. The Chairman of the
Board or the Chair of the CRCGC then submits a report to the Board, which
contains the appropriate recommendations.
g)Board succession planning
The Board oversees its succession planning process implemented by the
CRCGC, which includes establishing and regularly reviewing a list of potential
director nominees, taking into account predetermined criteria.
h)Gender parity
The Board feels that diversity among the members of the Board enriches
discussion and therefore recognizes the importance of increasing the number
of female directors and striving for parity between men and women on the
Board. Accordingly, the Board is continuing its efforts to find more female
candidates who meet the various selection criteria and has set an objective
to have women nominees for half of all directorships that become vacant in
the future.
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4.2. Performance assessment
4.3.Election and re-election
The Board regularly assesses its performance and effectiveness as well as
that of its committees, the Chairman of the Board, the committee Chairs and
the directors in fulfilling their mandates, in keeping with a process implemented
by the CRCGC.
The CRCGC is responsible for establishing and overseeing the process
whereby each director can confidentially assess the effectiveness and
contribution of the Board and its Chairman, of the Board committees and
their respective Chairs, as well as assess his or her own contribution as a
Board and committee member. It may call upon external consultants for
assistance with this duty.
The assessment process is conducted through one-on-one meetings.
Guidelines, prepared by the Corporate Secretary’s Office and approved by
the CRCGC, are given to each director to help him or her prepare for these
meetings and to facilitate their conduct. The guidelines consist of suggested
topics and questions for discussion at these meetings, including the Board’s
responsibilities, its relationship with management, its activities and its
composition, the structure and activities of the committees, the material
prepared for Board and committee meetings and the timelines of their
distribution to directors.
Each director then meets individually with the Chairman of the Board to
discuss his or her assessment of the performance of the Board, the performance
of each Board committee on which he or she serves and the committee Chair,
if applicable, and his or her own performance as a member of the Board. Each
director also gives his or her comments on the performance of the Chairman
of the Board to the Chair of the CRCGC or meets with him as needed.
Following these one-on-one meetings, the CRCGC holds a meeting where
members discuss and review the comments made during the one-on-one
meetings, and assess the appropriateness of any modifications or enhancements
in respect of the performance and effectiveness of the Board, its committees,
the Chairman of the Board, the committee Chairs and individual directors. A
report is then presented to the Board.
a) Election
The Board has delegated to the CRCGC the responsibility for selecting director
nominees for vacant positions and determining whether it is appropriate to
re-elect each existing director.
The CRCGC manages the process, establishes the criteria used to select
directors and periodically reviews them to ensure they continue to comply
with legislative and regulatory requirements, respect the Charter of Expectations,
and meet the Board’s current and future needs.
After it has completed the process, the CRCGC submits its recommendations
to the Board, which approves all new director nominees.
The CRCGC compiles and regularly reviews a list of potential director
nominees.
Assessment
process revised
by the CRCGC
Guidelines
sent by the
Corporate Secretary’s
Office to all directors
Follow-up
of action plans,
if necessary
b)Re-election
The CRCGC annually assesses the eligibility and availability of directors
nominated for re-election, based on their past performance assessments,
their attendance at meetings of the Board and the committees on which they
serve, their independence, their competence, and their length of service on
the Board. After it has completed the assessment process, the CRCGC submits
its recommendations to the Board.
c) Majority voting
A nominee will be deemed not to have received the support of shareholders,
even if he or she is elected, where the number of votes withheld exceeds the
number of votes cast in favour of his or her election at an annual meeting of
the holders of Common Shares. A director elected under such circumstances
must immediately tender his or her resignation to the CRCGC, which will
submit a recommendation to the Board. Where applicable, within 90 days of
receiving the final voting results, the Board will issue a press release announcing
the resignation of the director in question or explaining the reasons justifying
its decision not to accept such resignation. Majority voting would not, however,
apply in the event the director’s election is contested.
d)Term of a director and Board vacancies
A director’s term usually expires at the close of the next annual meeting of
the holders of Common Shares of the Bank after his or her election. Vacancies
on the Board are filled in accordance with applicable legislation.
The maximum period that a director may serve on the Board is 15 years
unless the Board, on the recommendation of the CRCGC, decides that, because
of exceptional circumstances, it is in the Bank’s best interest to recommend
the director for re-election. The computation of this 15-year period started in
1998 for directors in office at that time.
4.4.Orientation and continuing education of directors
Individual meetings
between the directors,
the Chairman of the Board
and the Chair of the CRCGC
Report to
the Board
Discussions
of the CRCGC
and drafting of
action plans, if needed
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To enable directors to familiarize themselves with the Bank’s operations and
business segments, and also broaden the knowledge they need to carry out
their duties, the Board, through the CRCGC, and taking into account each
director’s needs and knowledge, has implemented an orientation and
continuing education program.
a) Orientation program
The orientation program for new directors provides them with an overview of
the Bank, including its operations, activities and main challenges. More
specifically, new directors receive training on the following subjects: the role
of the Board and its committees, the role of directors, the Bank’s vision, its
main segments of activity, its business challenges, its audit and control
system, its human resources and its client base. Directors receive a copy of
the Code of Conduct, which they must respect.
Moreover, new directors attend information sessions with the Chairman
of the Board, the President and Chief Executive Officer, and the Bank’s senior
officers.
b)Directors’ Handbook
Directors are given a handbook containing a series of documents outlining,
in particular, their duties and the scope of their responsibilities as
directors.
c) Continuing education program
As part of scheduled Board meetings, directors regularly attend presentations
and training seminars offered by Bank representatives or, from time to time,
external consultants with the requisite expertise, in order to enhance their
knowledge about areas relating to their duties. At least 10% of the time
designated annually for the regular meetings of the Board is devoted to
continuing education. Moreover, the Bank encourages directors to participate,
at its expense, in training programs designed to enhance the knowledge they
need to carry out their duties, subject to the prior approval of the Chairman
of the Board or the Chair of the CRCGC and the director’s obligation to report
thereon to the Board.
4.5.Director compensation and share ownership requirements
The Board aims to offer directors adequate compensation that recognizes
the increasing complexity of the Bank’s activities, enables the Bank to recruit
and retain qualified individuals to serve on the Board, and also aligns the
interests of the members of the Board with those of the Bank’s shareholders.
It reviews and approves compensation, the form of compensation and the
allowances to directors to ensure that they reflect the importance of the
function and that the incentive compensation measures do not impair the
director’s ability to fulfill his or her role and responsibilities.
Therefore, the Board has adopted, on the recommendation of the CRCGC,
a compensation program that is reviewed periodically to ensure that it is in
line with the Bank’s reference market. The aggregate compensation that may
be paid to directors for serving on the Board and its committees during a
fiscal year may not exceed the aggregate amount specified in By-Law I approved
by the Bank’s shareholders.
Directors receive a retainer for serving on the Board. In addition to the
retainer for the Board, the Chairman of the Board, committee Chairs and
committee members receive retainers related to these positions. Moreover,
the Bank and its subsidiaries also reimburse directors for the expenses
incurred to attend meetings, including transportation and accommodation
expenses. The Bank discloses in its annual Management Proxy Circular the
compensation paid to the directors during the most recent fiscal year.
The compensation program for directors is also designed to align the
interests of the members of the Board with those of the Bank’s shareholders.
Accordingly, a director’s annual retainer is paid entirely in the form of Common
Shares or DSUs, or a combination thereof, until the share ownership
requirements for Bank directors have been met. Under these rules, all directors
are required to hold Common Shares of the Bank or DSUs with a total value
equal to or greater than five times the annual retainer received as a Board
member. Directors have five years from the date they take office to meet these
requirements. When they have met the minimum requirements, directors
may elect to receive their retainer in the form of cash, Common Shares or
DSUs, subject to the part of their retainer that must be paid in the form of
Common Shares of the Bank. In fact, part of the directors’ retainer, as well as
part of the retainer paid to committee members and committee Chairs, must
be paid in the form of Common Shares of the Bank even to directors who have
met the minimum requirements.
The directors of the Bank do not receive stock options for these duties.
They do not participate in any other compensation mechanism that offers
Bank shares nor a pension plan. They do not benefit from life insurance for
which the Bank pays the premiums and they do not benefit from any banking
product or service at preferred rates or reduced fees related exclusively to
their status as directors, except for a credit card with no annual fees.
Directors of the Bank who are also executives of the Bank do not receive
any compensation in their capacity as directors of the Bank or any of its
subsidiaries.
5.Measures for Collecting the Views of Stakeholders
and Communication
The Board ensures that measures are implemented to obtain feedback from
all stakeholders. The Bank responds to questions from shareholders, investors,
financial analysts and the media through its Investor Relations Department,
Public Relations Department, Corporate Secretary’s Office or registrar and
transfer agent. The Bank responds to clients with concerns or special needs
through its branch or telephone banking representatives. If a complaint cannot
be resolved through regular administrative channels, these clients may contact
the Bank’s Ombudsman.
In its Management Proxy Circular, the Bank provides an e-mail and a
postal address that stakeholders can use to contact the Bank’s Board, a Board
committee, the Chairman of the Board or a director, including an independent
director. The Corporate Secretary is responsible for ensuring effective
communication between the Board, the Bank’s management and
shareholders.
6.Procedures for Reporting Irregularities
The ARMC establishes a policy for reporting irregularities relating to accounting,
internal accounting controls and auditing matters at the Bank and oversees
its implementation. This policy sets out the process for the receipt, retention
and handling of such complaints and concerns, as well as the anonymous
and confidential communication by any person or Bank employee of concerns
relating to accounting or auditing matters. This policy is available on the
Bank’s website.
69
SCHEDULE C
MANDATE OF THE BOARD OF DIRECTORS
Mandate
Composition
1.
2.
3.
4.
Composition – The Board of Directors (the “Board”) is composed of
directors who possess extensive complementary knowledge and competencies, as well as relevant expertise enabling them to make an active,
informed and profitable contribution to the management of National
Bank of Canada (the “Bank”), the conduct of its business and the orientation of its development. Directors have the necessary time and interest
to perform their duties effectively.
Eligibility – A majority of the members of the Board must consist of
directors who are Canadian residents. A maximum of two thirds of the
members of the Board are persons affiliated with the Bank in accordance
with the Bank Act (Canada) (the “Act”).
Independence – A majority of the members of the Board are independent
as defined by the Canadian Securities Administrators. The Board, either
directly or through one of its committees, adopts structures and procedures to ensure the Board functions independently of management.
In Camera Meetings – The members of the Board who are independent
regularly meet without any members of the Bank’s management being
present at the end of each regular Board meeting under the direction of
the Chairman of the Board.
INTEGRITY AND CONFLICT OF INTEREST
5.
6.
7.
Integrity – Directors act with integrity and exercise impartial judgment
in performing their duties and fulfilling their responsibilities. Directors
are bound by the provisions of the Code of Professional Conduct and
other rules of ethics applicable to directors, officers and employees of
the Bank and its subsidiaries.
Conflict of Interest – Directors are required to disclose any conflict of
interest to the Chairman of the Board or to the Chair of the Conduct
Review and Corporate Governance Committee in accordance with the
Act.
Change in Function or Status – Directors must also inform the Chairman
of the Board or the Chair of the Conduct Review and Corporate Governance Committee as soon as possible of any change in professional or
personal status that could have an impact on their role as directors.
ROLES AND RESPONSIBILITIES
General
8.
9.
10.
11.
12.
13.
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The main duty of the Board is to oversee the management of the
Bank, safeguard its assets, and ensure its viability, profitability and
development.
The Board actively participates in reviewing and approving major
strategies and business objectives.
The Board regularly obtains reasonable assurance that the Bank is
operating within an appropriate control framework and that risk
management is assured.
The Board ensures that it is effectively governed.
The Board ensures that the Bank’s operations comply with applicable
legislation and regulations and, in that regard, reviews the processes
that ensure compliance.
In discharging its duties, the Board is assisted by three committees: the
Audit and Risk Management Committee, the Conduct Review and
Corporate Governance Committee, and the Human Resources Committee.
The Board assigns responsibility for managing and directing the operations of the Bank to management. The Board assumes the duties and
responsibilities set out herein.
Strategic Planning Process
14. The Board:
a) Periodically reviews and approves a strategic plan in which the Bank
establishes its mission, vision, business objectives and strategy,
taking into account the business opportunities and risks for the
Bank;
b) Reviews and approves the business plans relating to the Bank’s main
operations and reviews them regularly to ensure they remain appropriate and prudent given the Bank’s economic and business
environment, its resources and its results;
c) Reviews and approves the Bank’s operating results as well as its
actual versus projected financial results, in light of the Bank’s
business objectives, strategic plan and business plans; and
d) Reviews and approves operating budgets and material expenses not
included in the operating budget.
Risk Management
15. The Board:
a) Reviews and approves the overall risk philosophy and risk tolerance
of the Bank, recognizes and understands the major risks to which
the Bank is exposed and ensures that appropriate systems are set
up for effective management of those risks;
b) Requires that management report on the major risks to which the
Bank is exposed, the integrity of procedures and controls to manage
those risks and the overall effectiveness of the risk management
process;
c) Reviews and approves the organizational structure and risk controls
of the Bank. Plans an independent assessment of risk controls and
procedures implemented to ensure their effectiveness;
d) Requires that management adopt a process aimed at determining
the Bank’s appropriate level of capital in terms of the risks assumed
and oversees its implementation and application;
e) Discusses and approves all major policies of the Bank, including
those setting acceptance, monitoring, management and reporting
rules for material risks to which the Bank is exposed, as well as
changes to risk management policies;
f) Approves all certifications, reports and any other declarations
required from time to time by a regulatory authority and that fall
within the Board’s purview;
g) Approves all material aspects of risk ratings and assessment
processes;
h) Ensures that the Bank’s risk management activities, however
organized, have sufficient independence, status and visibility, and
are subject to periodic reviews; and
i) Includes a review of requisite or related changes in risk management
and controls in its review of the changes in strategies or new business
initiatives.
SCHEDULE C MANDATE OF THE BOARD OF DIRECTORS (cont.)
Mandate of the Chairman of the Board
16. The Board:
a) Approves the mandate of the Chairman of the Board and reviews it
from time to time in the absence of the members of the Bank’s
management who serve on the Board and the Chairman of the Board;
and
b) Annually appoints the Chairman of the Board from among the
members of the Board, sets his compensation and assesses his
performance.
Succession Planning and Director Compensation
17. The Board approves the appointment of any new nominee for the
position of director, reviews and approves directors’ compensation, how
that compensation is paid, and the allowances given to directors to
ensure that they reflect the importance of the function of director and
that the incentive measures provided for in the compensation programs
do not adversely affect the role and responsibilities of this function.
18. The Board oversees its succession planning process implemented by
the Conduct Review and Corporate Governance Committee.
Assessing the Effectiveness of the Board and Reviewing its Mandate
19. The Board regularly assesses the performance and effectiveness of the
Board, its committees and directors, in accordance with a process implemented by the Conduct Review and Corporate Governance Committee.
20. The Board regularly evaluates and reviews its mandate.
Succession Planning for Management
21. The Board approves the appointment of officers and ensures that they
are qualified and competent.
22. On the recommendation of the Human Resources Committee, the Board
sets the compensation of the President and Chief Executive Officer.
23. The Board takes cognizance of the annual performance objectives and
targets relating to the compensation of the President and Chief Executive
Officer.
24. With the support of the Human Resources Committee, the Board oversees
the succession planning process for management positions, including,
in particular, that of President and Chief Executive Officer.
External Auditors
25. On the recommendation of the Audit and Risk Management Committee,
the Board recommends to the shareholders the appointment of the
external auditors and approves their remuneration.
Communication and Disclosure
26. The Board approves the policies on the communication and disclosure
of information to shareholders, investors and the general public.
27. The Board ensures that the information presented to shareholders is
reliable and provided in a timely manner.
28. The Board reviews and approves the annual consolidated financial statements of the Bank and related external auditors’ report. The Board
reviews the interim consolidated financial statements of the Bank, the
annual and interim management reports, the processes for presenting
and disclosing annual and quarterly financial information, the audit
processes and management information systems and all other important
financial information, including the annual information form or press
releases and documents designated by the Office of the Superintendent
of Financial Institutions in order to ensure their integrity, the effectiveness of processes and compliance with applicable accounting
standards.
29. The Board ensures that measures are in place to receive feedback from
Bank clients, shareholders, investors as well as any other stakeholders,
including financial analysts. In that regard, the Board designates one
person to receive all comments.
Integrity and Ethics
30. The Board ensures that the rules of conduct and ethics are maintained,
in particular by adopting a code of professional conduct for directors,
officers and employees of the Bank and its subsidiaries, and that the
Bank has an ongoing, appropriate and effective process to guarantee
compliance with these rules.
31. The Board ensures that any material breach of the code of ethics and
professional conduct by a director or member of management is
disclosed in accordance with continuous disclosure obligations.
32. The Board requires that management set up a compliance program to
ensure the Bank’s compliance with the Act, applicable laws and regulations and any other obligations.
33. The Board ensures that the President and Chief Executive Officer and
other members of management are highly principled and that they foster
a culture of integrity throughout the institution.
Material Transactions
34. The Board discusses and approves any activity, contract or agreement
that is not in line with the Bank’s mission, is not in its normal course of
business or that exceeds the materiality thresholds set by the Board
from time to time.
35. The Board reviews and approves policies with respect to major initiatives
and activities.
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SCHEDULE C MANDATE OF THE BOARD OF DIRECTORS (cont.)
Governance
Expectations of the Board regarding Directors
36. The Board regularly reviews and approves sound governance
practices.
37. The Board discusses and determines the structure and general corporate
governance principles applicable to the principal business units,
divisions and functions of the group comprised by the Bank and its
subsidiaries in order to enhance the effectiveness of the oversight carried
out by the Board.
38. The Board ensures that procedures are in place for communication
between the Board and its committees and the principal business units,
divisions and functions of the group comprised by the Bank and its
subsidiaries.
48. The Board requires that directors comply with this mandate, particularly
with regard to the amount of time directors must devote to their duties,
the competency requirements, and the rules of conduct and ethics. The
directors must also comply with the Charter of Expectations for
directors.
49. Together with the Conduct Review and Corporate Governance Committee,
the Board oversees the implementation of orientation programs for new
directors and ongoing education programs on the operations of the Bank
and its subsidiaries for all Bank directors that take into account each
director’s needs and knowledge.
Exclusive Powers
39. The Board approves all matters that the Act assigns exclusively to
directors, in particular the approval of dividends, certain related party
transactions as provided for in the Act, and procedures to resolve
conflicts of interest.
Residual Powers
40. The Board assumes any responsibility not delegated to management.
Board Committees
Types of Committees
41. The Board is responsible for overseeing the management of the Bank
and may set up the appropriate committees to assist it in this role.
42. The Board may, from time to time, review the types of committees it
forms, appoint members and delegate the appropriate authority to such
committees, and approve their respective mandates.
Composition
43. The directors appoint the committee members and ensure that each
committee’s composition complies with all applicable regulations.
Committee Mandates
44. Together with the Conduct Review and Corporate Governance Committee,
the Board develops and approves the mandates of each Board committee
as well as those of the committee chairs. The mandates describe their
respective roles and responsibilities.
45. The Board delegates responsibility for approving and reviewing
committee mandates to each committee.
Minutes of Committee Meetings
46. The Board committees record the minutes of each of their meetings, and
the minutes are made available to the Board.
Ad Hoc or Special Committees
47. The Board may, from time to time, form appropriate ad hoc or special
committees.
72
Expectations of the Board regarding Management
50. Management is responsible for the day-to-day management of the Bank’s
operations pursuant to the powers delegated by the Board and in accordance with the laws and regulations applicable to the Bank.
51. Management facilitates Board oversight of business operations and
internal administration of the Bank by providing members of the Board
with accurate, complete, relevant and timely information and reports.
Management reports to the Board, providing it with informed opinions
on such matters as the Bank’s objectives, strategies, plans and material
policies.
APPROVED BY THE CONDUCT REVIEW AND CORPORATE GOVERNANCE
COMMITTEE ON OCTOBER 29, 2009.
APPROVED BY THE BOARD OF DIRECTORS ON OCTOBER 29, 2009.
INFORMATION FOR SHAREHOLDERS
Head Office
National Bank Tower
Montreal, Quebec, Canada H3B 4L2
Telephone: 514-394-5000
Website: www.nbc.ca
Registrar and Transfer Agent
For information about stock transfers, address changes, dividends, lost share
certificates, tax forms and estate transfers, shareholders are asked to directly
contact Computershare, the Bank’s registrar and transfer agent, at the address
and telephone numbers below.
Computershare Trust Company of Canada
1500 University Street, Suite 700
Montreal, Quebec, Canada H3A 3S8
Telephone: 1-888-838-1407
Fax: 1-888-453-0330
E-mail address: [email protected]
Website: www.computershare.com
For all correspondence (mailing address):
Computershare Trust Company of Canada
100 University Avenue, 9th Floor
Toronto, Ontario, Canada M5J 2Y1
Other inquiries may be addressed to:
Investor Relations
National Bank Financial Group
National Bank Tower
Montreal, Quebec, Canada H3B 4L2
Telephone: 1-866-517-5455
Fax: 514-394-6196
E-mail address: [email protected]
Website: www.nbc.ca/investorrelations
ISBN 978-2-921835-23-7
Legal deposit – Bibliothèque et Archives nationales du Québec, 2010
Legal deposit – Library and Archives Canada, 2010
www.nbc.ca

2010

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